Business 6 April 2021 Why the global shipping crisis is here to stay A global imbalance of containers, congestion at ports and the shaky economics of shipping itself could leave businesses with high costs until at least 2022. Christopher Furlong / getty images Sign UpGet the New Statesman\'s Morning Call email. Sign-up Had the 400-metre-long, 200,000-ton Ever Given not blundered into the eastern bank of the Suez Canal – and the headlines of the world’s news outlets – last month, it would have been due to arrive at the British port of Felixstowe on 6 April. Instead it is anchored in Egypt’s Great Bitter Lake, a body of water part of the way along the canal, undergoing safety inspections that will determine whether it can set sail without becoming a meme again. But while the internet has had its fun with pictures of a tiny little digger trying to refloat a boat the size of the Empire State Building, the global disruption of shipping could continue for months to come. In the waters off Los Angeles there are usually a few ships waiting for their slot at the two big ports – Los Angeles and Long Beach – through which many of the goods manufactured in Asia make their way to American consumers. Yesterday (6 April) there were 24 cargo ships at anchor, waiting to unload billions of dollars’ worth of goods at two of America’s busiest ports. Many of these ships are more than 300 metres long and hold tens of thousands of containers. Some will be forced to leave before they can take on exports. Container shortages, congested ports, see-sawing supply and demand and the finances of shipping lines themselves have all put a system that has very little tolerance for uncertainty under unprecedented stress. The situation in global shipping has become a long-term concern for businesses. Inventory of foreign-made consumer goods such as trainers and make-up is starting to run low as ports struggle to cope with demand. Nike’s third-quarter revenues were more than $1bn below expectations, partly as a result of shipping delays, while in the UK retailers have warned there may be shortages of items such as garden furniture as high shipping rates and lack of availability hit inventories. The main problem is what Simon Healey, a supply chain expert at the shipping consultancy Drewry, calls the “twin-speed recovery” between shipping lines and services on land, and between the West and China. Lockdown measures in China were severe at first, closing off supply almost entirely for a period, but they did not last long. Most Chinese factories were back to at least 80 per cent capacity by April 2020. Healey says shipping lines, too, returned to speed quickly. “Carriers were able to reactivate all the ships that they had parked up, but the same is not true for the ports and terminals and warehouses on the land side of operations. They had to struggle with issues of staff shortages due to the pandemic, and new Covid-safe rules.” With China and the shipping lines sending products to the US and Europe faster than ports could process them, shipping companies decided they couldn’t wait around to load up with empty containers (or exports) to take back to Asia. The result is that for every 100 containers that are shipped to North America, as many as 60 may stay there. This global imbalance in the availability of containers has caused a “bidding war” that led shipping rates to quadruple in January (normally the quietest month of the year for shipping). There has been particular congestion at some UK ports, especially Felixstowe, where a new container management system has caused so much disruption that, in October, freight forwarders asked the government to intervene. But the global problem is compounded by the fact that, in a year without holidays, shops, museums or theme parks, people have instead sat around buying things they don’t need on Amazon. In the US, consumer spending online in January 2021 was 28.7 per cent higher than in January 2020. Healey says this has become “a vicious circle, where more demand creates more disruption within the terminals, which therefore slows down productivity, so more containers aren't being turned around as quickly as they should, so you're not getting the physical boxes back [to] Asia”. The economics of the shipping business itself are also part of the problem. Companies have struggled for years to find cheaper ways to offer a service that is indistinguishable, as far as most customers are concerned, from everything else on the market. One of the ways they’ve sought to do this is by borrowing large amounts of money to buy bigger and bigger boats. The big, publicly traded shipping companies now average debts of more than ten times the earnings. With businesses bidding for freight capacity, they’re not going to hang around stabilising the system, whatever the long-term implications. This is not a situation that can be fixed, as the Ever Given stranding was, in a few days by some industrious people in tugboats. “We are working on the basis that it's going to last most of this year,” said Healey. A long enough period of disruption and high prices may lead to a more substantial shift in trade. Supply chain strategists are now concentrating on how regional or local supply chains can offer more “resilience” against trade shocks in an uncertain future. Just as the good ship Global Britain takes to the seas, many businesses are starting to wonder, one expert told me, if “globalisation” as we have known it “is really over”. [see also: The Suez Canal blockage is a reminder that geography does matter in trade] › Podcast: Commission Impossible Will Dunn is business editor of the New Statesman. Subscribe For more great writing from our award-winning journalists subscribe for just £1 per month!