Disclaimer: This is not a quantitative analysis, but rather an opinion piece reflecting the perceptions and opinions of Sea-Intelligence management team, as expressed by the author. These pieces will become a regular feature, alongside our other, highly data-intensive products and publications.

Author: Bjørn Vang Jensen

In our line of business, there is never a shortage of crises. Fires, collisions, containers lost overboard, strikes, earthquakes, floods, congestion, weather, and bankruptcies, just to name a few. We’ve seen and lived/managed through them all, and so have many of those who will hopefully read this. Shipping is risky business.

But currently, none looms larger than the global shortage of containers, resulting in declined bookings, cargo rolling, massive rate hikes, and consequent bad blood between shippers (BCOs and NVOs) and carriers.

And while neither party is completely in the clear, both parties are to a large extent subject to forces beyond their control.

There are many moving parts to this situation, and we’ll try to highlight some of them. No doubt, we have missed some, and so we would encourage a healthy and polite debate.

We will focus on Asia-USWC, because we have to start somewhere. Our sources are both terminal operators, truckers, and shippers, as well as our own experience. On other trades, different factors may come into play, not least the natural trade imbalances that have always existed.

It obviously starts with the boom in trade volumes caused by COVID-19. With E-commerce exploding, and people stuck at home with more focus on home renovation, plus enormous volumes of PPE that never existed before. Vessels are quite simply full or weighted/drafted out, and virtually every seaworthy vessel is deployed.

But the COVID impact doesn’t stop there. Many longshoremen are infected, resulting in most vessels that would normally be assigned 8 gangs now only getting 4. As per an article in Splash 247, up to 1,1800 longshoremen are currently either infected or absent for other COVID-related reasons, in LA alone!

This clearly causes enormous congestion, with vessels up and down the coast waiting for berth in ports that are already notorious for low productivity. This is not just an LA/LGB issue. Go on marinetraffic.com and filter for cargo vessels. You’ll see that Vancouver, Oakland, and SEA/TAC are not exactly in the clear either.

When the vessels do eventually berth and are discharged, many shippers have managed to negotiate free port storage far in excess of what is, in our opinion, reasonable.

When the boxes are eventually ready to gate out, the next problem is chassis availability, and as we know, chassis are not owned by carriers.

Why is there a chassis shortage? Partly because of the aforementioned overall cargo increase, and partly because shippers’ warehouses are full to bursting, and there is very little, if any, overflow to be rented at the moment. This means that shippers instead use the boxes themselves as overflow storage, and keep them mounted instead of grounding them, often far in excess of the detention free time they had originally negotiated with carriers. This means chassis are not returned into circulation.

So: Congestion=no full boxes landed and ready for stripping. Shortage of labor=longer discharge time. Extended port storage=yard congestion and longer time before container is gated out. Shippers holding on to chassis=fewer chassis in circulation. Fewer chassis=fewer empties available for return to the port and to Asia.

Lastly, in order to relieve congestion, terminals often have to ask a vessel to “cut and run”, resulting in lower westbound vessel utilization.

The one outstanding question we have heard many ask is whether there really aren’t any empty containers or chassis to be had elsewhere, from factories or leasing companies. We do not have the answer, but perhaps readers more knowledgeable can answer that question? In any case, we find that carriers have been conspicuously absent in their public communication to their customer communities and the public at large.

In our next piece, we intend to explore what impact we believe this will have on ongoing rate negotiations. Sneak preview: They won’t be pretty, or friendly!