Global shipping ‘mayhem’ continues to dog export markets

Exporters of secondary materials should expect a ‘new normal’ with higher shipping rates than they enjoyed before the global pandemic, according to a leading expert on maritime logistics and world trade.

The scenario was put forward by Bill Rooney, vp of strategic development at global logistics group Kuehne + Nagel, at the latest ISRI convention. Rooney – who said these were ‘strange times in the logistics world’ – set out several reasons and economic conditions for the current ‘volume stress’ in world trade. ‘Industry has run out of containers, basically,’ he told his online audience. ‘I don’t want to be [voice of] doom and gloom but this is unprecedented.’

Major factors included an economic rebound with consumers, often still heavily restricted in their movements, switching from services to buying goods. In the US, for example, spending on services remains 5.6% below where it was in early 2020 good have bounced back to a positive 7.3%, much of it catered for by acceleration in the growth of imports from Asia. ‘The percentage growth since last year is gigantic and it has overwhelmed the system,’ said Rooney.

The e-commerce boom meant more warehouse space with containers waiting longer to be unloaded. Although the picture being painted was for imports, the effect on logistics was much the same, and possibly worse, for exporters.

Another reason is that the ratio of US retail inventories to sales has fallen to a 30 year low. ‘Every retailer is rushing to rebuild inventories and that is adding to the cargo volume boom,’ he cautioned. The immediate future, he suggested, was of higher rates and continued delays and congestion – a situation Rooney had not seen in 40 years in the industry. The US rail car sector was also experiencing shortages and delays.

Troubling, too, was the lower reliability of the upwards of 6 000 container ships plying their trade round the world to arrive on time. Overall reliability of 70-80% in recent years had slumped to 35% this year. The numbers are even more startling in the US:

• Asia to East coast USA reliability of 13.1%; average delays of 6.7 days
• Asia to West coast USA reliability of 11%; average delays of 12.3 days

‘Being on time for 35% of the times is as good as never being on time because no-one can plan around that,’ Rooney added.

For exporters such as recyclers, there is the added threat that shipping lines are increasingly returning containers empty to lucrative Asia ports rather than waiting for them to be filled in the west with low value/high weight contents such as scrap. All this is pushing up shipping rates for exporting recyclers: ‘Higher rates for a poorer service,’ the speaker summarised.

One solution, he said, would be more ships to carry the higher demand for containers. More are being ordered but they typically take up to three years to build.  

Looking ahead, Rooney expected ‘the mayhem’ to continue through Q2 and not be back to normal by Q3. ‘If you are an exporter at this point you are facing at least as bad if not worse issues than importers,’ he concluded. ‘There will be a new normal that will probably mean higher rates than they were over a year ago.’