Pandemic triggers ‘perfect storm’ for global shipping supply chains

The coronavirus pandemic has left some of the world’s biggest shipping lines facing mounting backlogs and delays, straining international supply chains and threatening to disrupt global trade.

Operators say the container shipping industry — the backbone of global trade — is under severe pressure due to the combined impact of staff illness, quarantining and social distancing, along with soaring consumer demand and disruption to factory output caused by lockdowns.

Lars Jensen, chief planner of services for Maersk Line, the world’s biggest container ship operator, said there was a “perfect storm” created by a mix of rising demand and reduced capacity in logistics systems.

“There’s congestion in terminals,” said Mr Jensen, Maersk Line’s head of network. “There’s a shortage of truck drivers because some have not been able to drive. Particularly out of Asia, we see a part of that is linked also to the fact that a lot of companies are restocking.”

As a result “productivity slows down”, which “delays more ships, then we get a vicious circle”, Mr Jensen said.

Vessels are waiting to berth at some key ports. On Tuesday the Marine Exchange of Southern California, which monitors conditions at the two busiest US container ports, Los Angeles and Long Beach, reported 17 container ships at anchor waiting for berths. Another four vessels were due to arrive later that day, while only three were due to move into the port.

The port reported a record import volume of 506,613 containers in October — the latest figures available — up nearly a third from the same period last year.

In response, shipping lines are cancelling orders and diverting vessels.

Singapore, the world’s second largest container hub, saw its rollover ratio — the proportion of cargo arriving at a port that is shipped on a different vessel than originally scheduled — reach 31 per cent in October, compared with 21 per cent at the same time last year, according to data provider Ocean Insights.

“The entire supply chain is under pressure,” said Rolf Habben Jansen, chief executive at Hapag-Lloyd, another of the world’s largest container shipping companies. “The market situation is extraordinary.”

Covid-19 outbreaks can swiftly disrupt a port terminal’s productivity by forcing large numbers of staff to isolate, he added: “We’ve had examples where in a port 600 port workers were put into quarantine . . . [Even] if that port was on top of its game, then within a week you have 10 vessels struggling to get alongside [the terminal’s quays].”

CMA-CGM, the world’s fourth largest shipping line, last week announced it would not be accepting new bookings until the last week of December in order to “hopefully, put us in a better situation for January”.

But Philip Edge, chief executive of UK freight forwarder Edge Worldwide, said deferring orders would “only compound the problem” and lead to even higher freight rates later.

Pressure has been building since the start of the pandemic. As the virus began to spread and global trade contracted at an unprecedented pace, shipping lines cancelled hundreds of sailings. As trade has rebounded in recent months, demand for goods shipped from Asia has built up and lines are operating at close to full capacity.

Since the middle of the year the pandemic-driven boom in ecommerce has contributed to a doubling of the rates to move containers, as measured by the Shanghai Containerized Freight Index. Rates from Asia to the US west coast in particular have rocketed in recent months, and are now at record highs.

Although Hapag-Lloyd has boosted capacity by more than a quarter of a million containers this year, Mr Habben Jansen said that pandemic-related disruption persists: “We had too many boxes in the wrong places because of disturbances earlier in the year.”