The Shipping Industry is at sixes and sevens as the industry tries to grapple with container shortages to ship the goods across the world. Numerous reasons have been advanced around the global container shortage and the consequent impact on global trade.
The causes of the predicament whilst mixed, actually present a complex scenario compounded by the Covid-19 pandemic and the nature of the shipping industry.
The Ever Given vessel that was stuck in the Suez Canal for weeks heightened the concerns around several issues within the shipping industry. The Ever Given carries 20 000 40- foot containers across seas on an any single voyage.
The stuck vessel at the Suez Canal cost the global economy US$400 million every hour during that week revealed the Insider shipping magazine.
Due to the massive size of the vessel, no ship was able to pass through the canal as Ever Given blocked the passage resulting in delays of smaller vessels to reach respective destinations.
With improved technology big vessels have become choice vessels so as to capitalise on capacity and economies of scale. Ever Given is 400m long and these are the going dimensions of these ships creating challenges of docking at most ports, that still have to adjust facilities to cater for large vessels like Ever Given compounded by the diseconomies of scale as articulated by another trade expert.
The mishap at the Suez Canal is still being investigated and the International Maritime Organisation still awaits the causes of the Suez Canal accident that had rippling effects globally through the disruption of the global supply chains.
According to Bloomberg, container loss at sea has been relatively high in recent years. One Apus vessel , in November 2020 lost 1 800 containers into the sea due to strong gales, while Maersk Essen lost 750 containers in January 2021, followed by Maersk Eindhoven with a loss of 260 containers in February. This reflects huge product and financial loss partly attributed to "commercial pressure on the ships to arrive on time and consequently make more voyages."
Furthermore, causes of these accidents have controversially ranged from bad weather, staff shortages, to lack of observance of safety rules. However, it is the size of the vessels that is coming under more scrutiny than ever before. The huge number of containers on board on a given voyage present a huge threat to the crew and heightens the likelihood of containers landing on the seabed.
Bills of lading with incorrect weight of the containers has also been cited as other causes of accidents. The containers are arranged in the vessels according to weight and incorrect information has disastrous consequences in the event of a hostile weather such as strong gales.
Some analysists have attributed the shortage of containers to changed consumer patterns due to Covid-19. China is largely the country that has been able to position itself to meet the changed consumer patterns.
Due to Covid-19 the demand of manufactured finished goods has increased and most of these demand containerisations.
China apparently was the first country to experience Covid-19 and was also the first country to get out of it and position itself ahead of other countries to embrace the opportunities. Studies reveal that China exports far more than it imports and has been impacted by the shortage of empty containers according to the Africa Container Shipping.
The surge in e-commerce as observed by UNCTAD has resulted in the sky-rocketing demand of empty containers. This has been compounded by online consumers expectations who expect delivery of their goods as outlined in the contract of sale.
As outlined earlier the problems are complex than meets the eye in that while some areas are experiencing container shortages some areas are experiencing surplus. In both scenarios logistic companies are penalised.
Areas like Africa have a surplus of empty containers as they import more than they export. Out of 4 full container loads (FL) 3 containers return empty reports Africa Container Shipping. In addition, it takes more time to return the empty containers due to staff shortages caused by lockdowns.
The effect of all has been an astronomical rise of the freight rates. Freight rates have increased almost 100 percent across the region with West Africa experiencing the highest hike in Africa. UNCTAD has attributed this development to the long and relatively thinner routes obtaining in developing countries.
Globally policy makers have been caught unaware by this unforeseen development which borders on trade facilitation reform. The logistic chain including Customs Administrations have to relook at how they can contribute to quicker turnaround times for containers.
The AfCFTA secretariat has to be seized with this matter of astronomic freight rates the ground side of issues while the organizations like International Maritime Organisation to handle the maritime issues. Digitalised trade as recommended by UNCTAD as well as the need to investigate any flout of competition laws. These interventions may solve these unforeseen trade impediments, however, the real solution lies in an Africa continent that will revitalize the manufacturing industry.
They are only three major alliances in container shipping who control almost 90 percent of the container trade. Ramifications within the industry may take long while the inherent formation of cartels will always linger. At the end of it all the final consumer will bear the increase in freight charges.
Sitshengisiwe Ndlovu isresident of OWITZIMBABWE: MBA/UNCTAD: Trade and Gender Linkages/ IAC Dip/Cert: Trade in Services and SDGs: Robert Schuman Center of Advanced Studies/IDEPCert: Making the African Continental Free Trade Agreement Work. She writes in her personal capacity. For more on trade matters visit her Blog on website: www.owitzimbabwe.org