Port logjams, supply chain disruptions: Blow for economies
October 20 2021 12:09 AM
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Production on one side of the planet, and consumption on the other.
In the usually routine world of global logistics, the shipping system underpins globalisation.
But the enduring fallout of the still raging pandemic brought about supply-chain disruptions, idled factories and unleashed inflationary forces.
The chief challenge among the countless woes was moving freight, and it started with a sudden shortage of shipping containers.
There are about 25mn standardised shipping containers plying the seas on about 6,000 ships in a fragile network designed to stay in sync with port capacity, railroad lines and trucking networks. It’s a system that has lifted millions of people out of poverty and created a generation of discount-minded shoppers.
In normal times, it works so well that it has led to the widespread adoption of more efficient just-in-time inventory management.
However, the Covid-19 crisis led to unpredictable demand for goods and on-again-off-again lockdowns that idled port terminals.
By October 2021, ocean cargo rates had spiked ten-fold from a year earlier, sparking worries about the year-end holiday shopping season and disruption stretching into 2022.
Bloomberg’s Port Congestion Tracker shows a typhoon in Asia spawned another wild week for shipping in a year with multiple challenges: A vessel wedged in the Suez Canal, a dozen major storms, rolling Covid lockdowns disrupting key manufacturing hubs in China and Vietnam, a shortage of truckers and dockworkers, and a resurgence of consumer demand.
As of Friday, at least 107 container ships were waiting off Hong Kong and Shenzhen, the data show.
As the Big Crunch of 2021 has repeatedly demonstrated, a bottleneck in one corner of the globe eventually exacerbates a logjam or compounds shortages in another.
US ports have some of the highest congestion rates in the world, according to Bloomberg data.
The Port of Savannah, Georgia, on the East Coast had 25 waiting ships versus just six in port late last Thursday, leading all major ports with an 81% congestion rate.
In Europe, ports in Rotterdam and Antwerp had blockage rates about half that level.
That all spells trouble for the world economy.
Output by US industries fell sharply last month amid continued supply constraints hindering manufacturing, according to official data released on Monday.
The rapid surge in demand for goods as the American economy reopened in the wake of the Covid-19 shutdowns has created severe challenges for suppliers who struggle to get key materials and goods.
In a wider senses, concentration in the shipping industry is being blamed for dulling some of the competitive spirit that could have provided adjustments to swiftly changing demand.
In 2017, about a dozen container lines that control 80% of the global market formed three main alliances to share ships, co-operate on routes and limit excess capacity, an arrangement that has been likened to an oligopoly.
Of late, US and European regulators have raised questions about constrained competition.
National authorities can influence a narrow range of industry practices. However, the global nature of the container trade means it’s beyond the reach of national regulators, who are unlikely to be able to do much to control prices.



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