The supply chain is broken and there is no easy way to fix it. What are the reasons for the delays and when will they get better? We hired the furniture industry veteran and long-time editor Ray Allegrezza to create a multi-part series to solve the challenge at hand. In the third part, he will carefully study the causes and effects of the global container shortage.

The supply chain is an intricate entity, yes, but it can essentially be divided into four main parts: Someone makes things. Things are shipped somewhere. Someone receives that thing and distributes it for sale. Finally, someone bought it.

This is the perfect world scenario. But the world is not perfect-as the shortage of containers continues and escalates, the global supply chain is also not perfect.

One of the biggest supply chain problems this year is the shortage of containers. Another "gift" of the pandemic is that the lack of containers may be directly related to persistent problems, including long delivery times, soaring freight and transportation costs, increasingly empty retail shelves, and rising cash register prices.

Problems related to shortages are growing at the same rate as the COVID-19 virus. As the pandemic spread rapidly — first through China and then around the world — it triggered a wave of blockades, production stagnation, and closure of manufacturing facilities. It also led to the accumulation of a large number of empty containers in the port.

The freight company just wants to go to sea with a full ship. Therefore, with the increase in empty container inventories — coupled with significant reductions in production by global manufacturers — the response of carriers is to greatly reduce the number of ships they will float. As an alternative to paying for ships with insufficient operating capacity, many carriers have also begun to bypass smaller ports or reduce port space to save operating costs.

Empty containers left unused in ports are not good for business-but when these containers cannot be shipped back to China, the situation gets worse. The problem has reached a tipping point, because it is increasingly clear that the infrastructure needed to send them back to China is simply not in place.

The trade imbalance with China is nothing new. In 2020, the United States imported US$434.7 billion worth of goods from China, while exports to China were only US$124.5 billion. Sea-Intelligence is a company that provides market intelligence on global supply chain issues. It stated that even before the pandemic, there was an imbalance in Asian containers (up to 45%), especially caused by empty containers in North America. . Today, the imbalance has become more serious, increasing to 55% or 60%. In a recent blog post on critical supply chain barriers, the company wrote: “The global shortage of containers is the most serious, leading to declining bookings, rolling cargo, and substantial interest rate hikes. Discord between."

Another reason for the shortage of containers involves the sharp increase in consumer demand, which is due to the steady growth of e-commerce sales in 2020 and the long-term lockdown. Complicating the situation are the countless other epidemic-related factors that I have introduced before: shortage of dock workers and drivers, port restrictions and congestion, etc.

Although labor shortages at all levels play an indirect role in the shortage of containers, Sea-Intelligence pointed out that dock workers with COVID-19 have particularly exacerbated the problem. According to the company, “many dockers have been infected, resulting in most ships normally assigned to eight gangs now getting only four. This has caused huge congestion, and coastal ships are in ports that are already notorious for low productivity. Waiting for the berth."

At the end of last month, in response to the surge in new cases, China, as part of its "zero COVID" policy, imposed a seven-week mandatory quarantine on cargo ships and their crews that plan to return to China. According to sources close to the operation, even a cargo ship with a new crew at a port outside China must wait 14 days before being allowed to dock there. As a result, most ships were forced to divert, adding new delays and costs, and further restricting the passage of containers. Such measures may be much less disruptive to the supply chains of smaller countries. However, since the shipping footprint is as large as China, this new quarantine policy may bring about a series of new problems.

As the shortage of containers has not yet ended, some industry insiders have hoped that major Asian container manufacturers will increase production, including Asian container manufacturers that account for more than 80% of global container supply, including CXIC, Singamas and CIMC. But according to the Drewry Maritime Research Center, the world may not want to hold its breath. Although the agency predicts that container production will increase by the end of this year, the magnitude is small-less than 7%-and it hasn't even happened yet.

At the same time, global production in 2021 is estimated to increase by 6.5%, and the price of new containers has increased exponentially. And, unsurprisingly, some people believe that container manufacturers are enjoying the view from the cat and bird seats, and believe that there is no reason to increase production significantly.

Although I cannot say which party is right, it is certain that the container will still be a high-quality commodity at least in the first half of 2022.

Ray Allegrezza is the executive director of the International Housewares Representative Association, which was established in 1934 to focus on meeting the needs of industry sales representatives. As an industry veteran with more than three years of editing, publishing and marketing experience in the field of household products, Allegrezza served as the editor-in-chief of "Furniture Today" from 1995 to 2014.