Global Shipping Crisis: Holidays delayed this year? 🎄

What is the global shipping crisis? Why is it happening? + It's implications.

Oct 04, 2021

Hi, Ravdeep here. 👋

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The topic I was writing on last week has a HUGE scope of things associated to it so I thought I’ll continue to do more research on that and go with another topic this week instead.

Did you know that there is a global shipping crisis going on right now which is creating shortages across industries and can continue through 2022? Let’s break this down!

What is the Global Shipping Crisis? 🚢

A spike in demand for goods in United States and Europe + Coronavirus pandemic disruptions = Increase in cost of moving containers of goods in the US & globally + Delays at ports and logistics hubs + Decimation of supply chains around the world.

A report released this week by Citigroup and the Economic Intelligence Unit suggests that these problems are here to stay and are unlikely to be solved soon. In Britain, the shortage has pushed McDonald’s restaurants to stop sales of milkshakes (like the milkshake and ice-cream machine ever worked in the first place) and several bottled drinks. It has also forced Nando’s to temporarily close 50 odd stores. In the United States, there are a lot of ships that are stuck between the ports of LA and Long Island which is quite visible by people flying through that area.

Why is there a Global Shipping Crisis right now? 🤔

There are several factors involved here with increased demand just being one of them. The shipping crisis has been building up for a while now and we’ll only see it get worse till it gets better somewhere in 2022. Let’s see the various factors that played into this becoming what it is today:

Increased Demand: With people and entire countries getting back to normal lives like we used to have before the pandemic, demand has gone through the roof. With increased demand, there has been a strain on logistics and manufacturing setups throughout the world.
Port Closures: The Ningbo Zhoushan port in China was shut for two weeks in August due to a Covid outbreak. This port is one of the busiest ports in the world and China’s second largest port.
Ever Given Fiasco: Remember back in March, when we saw a small loader trying to free a large ship stuck in the Suez Canal? Well, that ship is also one of the factors that has led to this crisis when it blocked the canal for six days straight.
Labor Shortage: Shortage in labour at the ports and in logistics all over the world has been one of the primary bottlenecks leading to this crisis.
Shipping Prices: Just a year ago, it would have cost less than $2,000 to ship a typical 40-foot container from the Far East to northern Europe. As of this week, the current average price had soared to $13,607. Similarly, the price for moving the same container from the Far East to a port on the Mediterranean rose from $1,913 to $12,715.
Container Shortages: Shipping containers are also quite in demand at the moment. With container manufacturers slowing their production in 2019 and early 2020, the shortage became evident soon. Manufacturers are now struggling to catch up with the demand and prices have skyrocketed!
Manufacturing Problems: Regular Covid outbreaks at factories (which leads to shutdowns) have caused production and manufacturing delays which further causes ripples in global logistics.
Limited Flights: Air cargo capacity has significantly come down due to Covid again. With companies converting their passenger flights into cargo planes, the air cargo fee has gone up considerably leading to further problems.
China: The country has been going through a spell of bad luck with first the Evergrande scenario and now they are facing a new problem. China is facing an energy crisis. In recent days, factories in 20 of China’s 31 provinces have suffered a loss of power, forcing many to shut down production, at least for hours at a time. This further causes manufacturing problems that only contribute to the shipping crisis even further. I’ll write more about the China energy crisis on Instagram or Twitter so be sure to follow us!

What are the implications of this crisis? 🔥

Expect holidays to come late this year due to product shortages and delays. This might go on for a while as we saw that there is a considerable clogging up of ports which can cause this crisis to go well into the next year and probably even more than that. Also, expect the prices of a lot of goods to go significantly go up due to increased freight prices, increased demand and short supply. (Economics 101)

In short, you’re not getting that PS5 any time soon!

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