Off the coast of Los Angeles, more than two dozen cargo ship ships filled with exercise bikes, electronics and other highly sought-after imports have been idling for two weeks.
In Kansas City, farmers are struggling to send soybeans to buyers in Asia. In China, North American furniture piles up on factory floors.
Across the planet, the pandemic has disrupted trade to an extraordinary degree, increasing the cost of shipping goods and adding a new challenge to the global economic recovery. The virus has dumped the choreography of transporting cargo from one continent to another.
At the center of the storm is the shipping container, the workhorse of globalization.
Americans trapped in their homes have embarked on a boom in orders from factories in China, many of which were carried in containers across the Pacific – the metal cabinets that move goods in large piles on huge vessels. As households in the United States filled bedrooms with office furniture and basements with careers, the demand for shipping exceeded the availability of containers in Asia, and there was a shortage just as the boxes piled up in American ports.
Containers that transported millions of masks to countries in Africa and South America early in the pandemic remain there, empty and unclaimed, because shipping partners have concentrated their vessels on their most popular routes – those connecting North America and Europe with Asia.
And in ports where ships do arrive and carry goods to unload, they are often stuck in floating traffic jams for days. The pandemic and its limitations limited the availability of dock workers and truck drivers, causing delays in handling cargo from Southern California to Singapore. Every container that cannot be unloaded in one place is a container that cannot be loaded anywhere else.
“I’ve never seen anything like it,” said Lars Mikael Jensen, head of the Global Ocean Network at AP Moller-Maersk, the world’s largest shipping company. ‘All the links in the supply chain have been stretched. The ships, the trucks, the warehouses. ”
Economies around the world are absorbing the ripple effects of the disruption at sea. Higher costs of transporting American grain and soybeans across the Pacific threaten food prices in Asia.
Empty containers are piled up in ports in Australia and New Zealand; containers are scarce in the Indian port of Kolkata, forcing manufacturers of electronic parts to transport their wares more than 1,000 kilometers west to the port of Mumbai, where supply is better.
Rice exporters in Thailand, Vietnam and Cambodia are sending shipments to North America due to the inability to secure containers.
The chaos at sea is a bonanza for shipping companies such as Maersk, which in February quoted record high freight rates to earn more than $ 2.7 billion in pre-tax in the last three months of 2020.
No one knows how long the revolution will take, although some experts assume that containers will remain scarce by the end of the year, as the factories that make them – almost all in China – are scrambling to catch up.
Since they were first introduced in 1956, the containers have revolutionized commerce by packing goods in standard-size containers and hoisting them with cranes on railroads and trucks, effectively shrinking the world.
Containers are how flat screens manufactured in South Korea are moved to plants in China that assemble smartphones and laptops, and how the finished devices are shipped across the Pacific to the United States.
Any hitch means delay and extra cost for someone. The pandemic disrupted every part of the journey.
“Everyone wants everything,” said Akhil Nair, vice president of global transport management at SEKO Logistics in Hong Kong. “The infrastructure can not keep up.”
The devastation begins like this
More than a decade ago, during the global financial crisis, shipping companies saw their businesses.
As a mysterious virus broke out in China early last year, prompting the government to close factories to limit its spread, shipping has boasted of a recurrence. Manufacturers are cutting back on their services and turning many of their vessels on the diaper.
But even amid the downturn, orders for protective equipment such as surgical masks and gowns worn by medical personnel in the front line have increased, many of which were made in China. Chinese factories have sprung up and container ships have been transporting their products to destinations around the planet.
Unlike the financial crisis, when the economic recovery took years to gather power, Chinese factories roared back in the second half of 2020, generating strong demand for shipping.
While shipping companies deployed every vessel that could float, they concentrated on routes with the greatest demand – especially China to North America.
Pressure that increased as Americans redesigned their spending. Deprived of holidays and restaurant meals, they bought video game consoles and dough mixers. They equipped their homes for distance work and distance learning.
Exercise equipment shipped by container from Asia to North America more than doubled between September and November, compared to the same period a year earlier, according to analysis by Sea-Intelligence, a research firm in Copenhagen. The delivery of stoves, series and cooking equipment almost doubled in that period. Disinfectants increased by more than 6,800 percent.
“All the good that grows is basically caused by pandemics,” said Alan Murphy, the founder of the research group.
Broadly speaking, the volume of global trade in 2020 fell by only 1 percent compared to the previous year. But that does not reflect how the year unfolded – with a dip of more than 12 percent in April and May, followed by an equally dramatic turnaround. The system could not adjust, left containers in the wrong places and pushed the delivery prices to extraordinary heights.
Peter Baum’s company in New York, Baum-Essex, uses factories in China and Southeast Asia to make umbrellas for Costco, cotton bags for Walmart and ceramics for Bed Bath & Beyond. Six months ago, he paid about $ 2,500 to ship a 40-foot container to California.
“We just paid $ 67,000,” he said. “This is the highest freight rate I’ve seen in 45 years in the business.”
In early September, he waited 90 days to secure space on a ship for a container with cane chairs and tables.
Another US importer, Highline United, which imports women’s shoes from China and Hong Kong for brands such as Ash, Isaac Mizrahi, pays more than five times its regular price for shipping.
“It’s a classic supply and demand,” said Kim Bradley, chief operating officer of the company, which is based in Dedham, Mass.
Traffic backup in California’s jammed ports
In the twin port of Los Angeles and nearby Long Beach, the download was delayed by a lack of dock workers and truck drivers, as the virus made some sick while forcing others to quarantine.
“The backlog is expected to remain in volume until midsummer,” Los Angeles Port Director Gene Seroka said at a recent board meeting.
The ships outside Los Angeles have available anchorages and use so-called floating boxes – zones where they float freely, such as planes circling overcrowded airports.
Major consumer brands – from the sportswear manufacturer Under Armor to Hasbro, the game and toy manufacturer – have had to deal with bottlenecks.
Peloton points to the congestion of ports as a factor behind its delay in the delivery of high-quality stationary bicycles. To shorten the waiting time, Peloton outlined plans to invest $ 100 million in aviation and fast sea freight.
But even in normal times, air freight is about eight times the cost of sea freight. Most air cargo is transported in the cargo holds of passenger aircraft. With a severe air constraint, the available cargo slots are also available.
Some distractors rearranged their schedules and stopped in Oakland, California, 400 miles north, before heading to Los Angeles. But containers are stacked on ships in configurations as determined by their destinations. A sudden change in plans means you have to move the stacks like a Jenga game.
And the port in Oakland has its own pandemic problems. Dockworkers are home carers for children who are not in school, said Bryan Brandes, the maritime director of the port.
“In normal times, vessels come directly to Oakland,” Brandes said. “Right now we’re ranging from seven to eleven vessels at anchor.”
Empty containers are returned to Asia
The dysfunction on the American West Coast has caused problems thousands of miles away.
Scoular, one of the largest agricultural exporters in the United States, loads grain and soybeans into containers at terminals like Chicago and Kansas City, and then sends them by rail to the ports in the Pacific on their way to Asia.
Given the prices that containers fetch in Asia, shipping trucks increasingly unload in California and then immediately place empty boxes on ships for the return trip to Asia, without waiting to load grain or other U.S. exports. This has led companies like Scoular to scramble to ensure passage.
Delays in ports regularly bump Scoular’s containers onto various vessels, forcing the company to redo its customs paperwork – another delay.
“This is a problem with the reliability of the schedule,” said Sean Healy, manager of Scoular. “This is a global problem.”
Nobody knows how it ends
In recent weeks, shipping trucks have aggressively moved empty cargo containers to Asia, according to information from Container xChange, a consultant in Hamburg, Germany.
Some experts assume that as vaccinations increase and life returns to normal, Americans will once again shift their spending – from goods to experiences – which reduces the need for containers.
But even if that happens, retailers will start building up stock for the holiday sales.
The stimulus spending plan moving through Congress could enclose rents that could trigger another spate of purchases, as previously unemployed people replace outdated appliances and add to their wardrobes.
“There could be a whole other part of the consumers who could not consume,” said Michael Brown, a container analyst at KBW in New York. “You may be looking at deficits for a while.”