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Industry Alert: Container Shortage Challenges Global Shipping

Industry Alert: Container Shortage Challenges Global Shipping

Published: Jan 22, 2021

Situation

NEI consistently alerts clients to the impact of the COVID-19 pandemic on global mobility. In a related consequence, concerns over the shortage of international cargo containers has led to an unprecedented spike in shipping costs from Asia to the U.S. and Europe.

Rates for containers have increased more than 200 percent compared with this same time last year and shipping rates for 40-foot containers jumped 23 percent in mid-December alone, based on World Container Index data.

As NEI reported last fall, air shipments remain costly compared to pre-pandemic times, but costs seem to be leveling off. As aircraft flights and cargo capacity increases, we would expect to see air shipment pricing decrease.                                    

Brief Background

Since the 2020 stimulus economy kicked in, Western consumers under lock-down have shifted spending from services to consumer goods, mainly imported from Asia. Workforce disruptions due to pandemic restrictions across North America affected ports, cargo depots and inland transport lines, which only added to the growing container shortage problem.

As a result, most shipping containers sent from Asia to Europe and North America did not return quickly enough to reload. Containers have piled up as international borders tightened with higher COVID-19 cases. In turn, customs clearance became more complicated, worsening congestion.  Consider that North America currently faces a 40 percent container imbalance – that is, for every 100 containers that arrive only 40 are exported back now.

What You Can Do

Companies need to carefully weigh the impact of the rate increases and potential incremental costs of delayed shipments (e.g., temporary storage) against the increased stress delays place on relocating employees who will have to wait much longer than expected for their goods.

If NEI is not managing your international shipments, we recommend:

  • Budgeting for additional freight rates in your cost estimates.
  • Working with partners to develop processes that include verification that freight increases are genuine.
  • Questioning rates received that are much lower than what the overall market is reporting to lock in the business, only to be asked later for large increases without warning.

The Shipping Forecast

Some believe the lack of supply could last through Q2 or perhaps Q3 of 2021 as another U.S. stimulus package could unleash more U.S. consumer demand for goods exported from Asia.  Although companies that build new international shipping containers are now at maximum production capacity, consumer pressure for imported goods could keep the pressure steady on container availability.

On the contrary, if COVID-19 rates decline due to social distancing and vaccine success, Western consumers may soon shift their spending from imports back to restaurants, travel, and other service sector activities that will be deemed safe again once the pandemic recedes.

Because no one knows exactly how long the pandemic will continue to impact global shipping patterns, be prepared for this trend to continue and consider reasonable policy changes going forward. This could include exceptions made specifically due to COVID-19’s continued disruption; setting new expectations with relocating employees; and alternative policy considerations for shipping international household goods.

NEI Guidance

NEI continues to be diligent and cognizant about client costs for every single move. We will work with each client to discuss the most cost-effective international household goods shipping options available and considerations for providing a relocating employee a small allowance towards being without those goods due to a longer transit.

As this situation continues to unfold, NEI will provide clients with updated information and manage relocating employee expectations accordingly. If you would like to discuss policy changes or options to reduce global container shipment costs during COVID-19, please reach out to your NEI representative or Mollie Ivancic, NEI’s VP, International Services.

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