The holiday shopping season is looking rocky due to ongoing global supply chain disruptions. This comes after nearly 18 months of problems in shipping networks, resulting in a shortage of consumer goods and increased transportation costs for businesses.
Companies like Adidas, Crocs, and Hasbro have warned about potential logistics issues ahead of the end-of-year rush. Bob Biesterfeld, CEO of C.H. Robinson, one of the world's largest logistics providers, said the pressure on global supply chains has yet to let up and there's no sign it will in the near future.
The latest challenge stems from China, where a terminal at the Port of Zhoushan in Ningbo, just south of Shanghai, has been closed since August 11 after a port worker tested positive for Covid-19. Major shipping lines like Maersk, Hapag-Lloyd, and CMA CGM have adjusted their schedules to avoid the port, warning customers to expect delays.
The closure of this major container port is adding to ongoing problems at the Yantian port, which has also been dealing with a pandemic-related lockdown. The combined issues are exacerbating container shortages, factory shutdowns in Vietnam due to Coronavirus, and after-effects of the Suez Canal blockade.
Shipping lines expect the global crisis to continue, driving up transportation costs significantly and potentially intensifying consumer price pressures. CEO of Hapag-Lloyd, Rolf Habben Jansen, said they don't expect market conditions to ease until at least Q1 2022.
According to Drewry Shipping Lines, shipping costs from China to North America and Europe have continued to rise over the last few months, escalating from highs at the beginning of the year. Their World Container Index shows the cost of transporting a 40-foot container on major East-West routes reached $9,613 in the week ending August 19, a 360% increase from the same time last year. The biggest increase was on the route from Shanghai to Rotterdam, where costs for a 40-foot container surged 659% to $13,698.
Maersk, one of the world's largest container shipping lines, has attributed the high freight rates to a lack of supply matching the high demand, saying there simply isn't enough capacity.
The congestion at the Yantian port was bolstered by the closure of nearby Yantian port in June, after it was discovered that port workers had been infected with a new Coronavirus strain. The partial reopening of Yantian only lasted a few days, but the aftermath saw the overload extended to other ports, leading to a delayed return to normal operations.
This creates problems for retailers planning to restock their inventory during the critical end-of-year shopping season. S&P Global Panju.com warned that the Ningbo factory closure could disrupt exports to the United States and Europe, as goods usually arrive in those regions between September and November.
Eric Oak, a supply-chain research analyst at S&P Global Panju, said that since May, U.S. import volumes have surpassed October 2020 levels, the typical peak of the shipping season, indicating that logistics facilities have been operating at full capacity for months.
The U.S. isn't the only country experiencing issues. Häfen in neighbouring ports of Los Angeles and Long Beach are reporting delays, with approximately 36 containerships waiting in the vicinity. This is the highest level since February, when 40 containerships were waiting to enter the port.
The backlog in ports is adding strain to warehousing and transportation infrastructure, as well as exacerbating a truck driver shortage in the U.S. and UK. As a result, delivery disruptions are expected to continue.
In conclusion, the ongoing shipping crisis, due to factors such as the Red Sea crisis and new tariffs, could lead to higher prices and longer delivery times for Christmas shopping in 2021. Retailers should prepare for these challenges, keep customers informed, and possibly offer flexibility to manage expectations.
