May 20, 2021
Headline after headline in transportation news all seem to be saying the same thing: the cost of imports is going up up up, with no end in sight. In the market the transportation industry is living in today, space is king. Shippers are willing to pay high rates (sometimes $3,000 - $5,000 more per container!) in premium and diamond space fees just to get their cargo on a boat with its stern pointed to Los Angeles.
This influx of movement in these major trade lanes means unprecedented delays at origin and destination, with diminishing space being booked inland U.S. that would mitigate the time a container is used. Contrary to expectations, demand for container shipping grew during the pandemic, bouncing back quickly from an initial slowdown. These containers and the vessel space were sucked up by PPE and other covid related products. The normal FAK commodities volumes, however, did not slow, causing widespread delays at Chinese origin ports and intra-China trucking.
An elevated demand for containers
A trade market boom in the second half of last year caught container producers by surprise as the pandemic threw the existing supply of about 25 million containers off their normal out-and-back routes. The manufactures have been ramping up output ever since, but they are unable to alleviate shortages that have bolstered soaring freight rates for six months. Record imports means elevating demand for containers in the second half of 2021.
Going forward the news seems to predict that the post Covid-19 economy is going to normalize trade via containers, but we are not going to see a situation where there are an excess of containers in the market. This means current high freight rates could continue for some time, and we will watch that carefully.