Experts predicted that finding space on containerships was going to be a challenge for shippers during the 2021-22 contract period. However, no one predicated the severity that the space crisis is currently having on supply chains across the US. To make matters worse, the lack of container space has not peaked yet. The space problem is going to get a lot worse before it gets better. Shippers will struggle to find adequate container space to move their cargo through the end of the year.
The main driving force behind the current crisis is the unprecedented demand. Imports from Asia have increased for 10 consecutive months. The month of April saw containers from Asia increase 29% over last year. The carriers simply do not have the available capacity to enter into the trade to meet this type of demand. Several carriers have ordered new containerships, but deployment will not take place until 2023.
The lack of space is having a ripple effect on factories all throughout Asia, especially China. Factories do not have the space to act as warehouses. Factories are demanding US customers find a way to remove their product or risk being shut down. Shippers are trying to help by moving product out of the factory into warehouses, but available warehouse space is tough to find.
Shippers waiting for the carriers to start providing solutions will be disappointed. Carriers privately admit that they are not equipped to handle the tremendous surge the major markets have seen over the last 10 months. The surge in demand is taking place in every major market not just the Asia to US market.
Shippers must understand that this is not a normal shipping year. Carriers are strictly monitoring how containers are being booked overseas. For example, a shipper that has been allocated 4 containers a week with a particular carrier must only book 4 containers. If the shipper tries to book 5 containers, the entire booking will be rejected. Pressuring the carrier to accept the additional 1 container was common practice in past years. This tactic will not be an option in the current environment.
Bottom line, shippers must consider all options to move their containers this year. Many of these options such as airfreight will come with a very steep price tag. Without a doubt, shippers need to somehow find unconventional ways to get their containers on US soil. Once in the US, there will be options to move the containers to the final destination.
