A Bumpy Ride Ahead for U.S. Importers with Ongoing Container Crisis
A Bumpy Ride Ahead for U.S. Importers with Ongoing Container Crisis | Red Arrow Logistics

As the year progresses, it appears that the global container constraints will most likely not end anytime soon. With container capacity continuing to be limited and an imbalance in trade on some routes, U.S. importers should prepare for a difficult month or two ahead. Many U.S. importers are having a very difficult time booking current and future loadings.

Record Level Container Shipping

The year continues to produce record-level use of containers. Approximately 1.4m teu of new containers were delivered in the first quarter of this year, which is 10% more as compared to the last quarter of 2020. John Fossey, senior analyst of container equipment at Drewry Shipping Consultants says, “Based on current activity, we believe the full-year 2021 production could be more than 4.7m teu.  That would be a record year for container production, beating the 4.42 teu produced in 2018 and 52% up on the 3.1m teu delivered last year.”

He predicts that the equipment shortages will also remain until next year as carriers continue to use larger ships and extra loaders to account for the increased demand, which just leads to more port congestion. It is much harder for ports to accommodate a spike in demand as more operators need to be hired (and trained) and the continued battle of absenteeism due to COVID-19 exposures and quarantine regulations.

While the congestion at the ports has decreased somewhat, it is not a sign that capacity is balancing out. The Port of Los Angeles is down to a backlog of 20 vessels at a time (as compared to 30 a few months ago), however, this gives no indication that the container crisis is over. 

Increased Volume is Not Slowing Down

The lack of containers is due to the shipping volume, which is not showing any signs of slowing. Volumes for the first quarter of the year are still inflated as retailers attempt to restock inventory.  Even if consumer demand were to slow down later this year, capacity and rates will remain high because of inventory restocking. Contract rates, which are up anywhere from 30% to 50% will also be inflated for some time.

The level of trans-Pacific imports was 51% higher in March 2021 as compared to 2019 (March 2020 is not a good indicator due to COVID). The month of May is also seeing this continued demand with everything on the trans-Pacific route already sold out. Some shippers have tried offering a higher rate to ship items but there is no available capacity to buy—at any price. Some shippers will not even be able to get on a carrier at all, which means their goods will remain at a standstill.

The shipping imbalance is creating an export backlog in Asia, which means inflated rates and difficulty booking slots will remain in effect for months to come.

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Purchasing New Containers

The incident with the blockage at the Suez Canal also pulled container equipment from the market for several weeks. This added to the container shortage as ships were stuck waiting to cross the canal. Simply purchasing more containers to mitigate the shortage is not an easy solution as the prices for new containers are at an all-time high. The average price of a 40ft high-cube was $6,160 in the first quarter of 2021, which is 90% higher than last year. The average lease time for these containers is also increasing, from about 9-10 years to 15 years.

Options for U.S. Importers

For smaller, more urgent shipments, there is still room for May bookings on less-than-container load (LCL) shipments. Importers may need to break shipments up and choose LCL for some of the goods to get them moving. 

Booking on other routes may also be a consideration for shippers. For example, utilizing a transshipment option may help to get freight moving faster but with a longer transit time. Airfreight while expensive can be an alternative to excessive pre-booking time required by the steamship lines. 

Your Trusted Partner

At Red Arrow Logistics, we provide expertise and white glove customer service with fast-growing, complex, and high-value supply chains. As the next-generation model of logistics companies, we offer tailored transportation and logistics solutions to meet your international shipping needs. We are an NVOCC, OTI license holder, and an IATA freight forwarder. We have partnerships in over 185+ countries to handle all of your required needs.

Red Arrow Logistics offers the scale and scope to handle your air, ocean, imports, and exports. No shipment is too large or too small. If we can be of assistance, please email us at international@redarrowlogistics.com or give us a call at 425-747-7914.