If the blocking of theEver-Given in the Suez Canal marked the spirits last March, the event is only the symptom of a deeper disorganization of the maritime freight sector. Because since the recovery of the global economy this summer, a cascade of more or less unforeseen events by the sector is weakening many supply chains. And we are witnessing an unprecedented surge in the prices of containers, these metal boxes emblematic of globalization which have, in recent months, almost quadrupled.
In the first quarter of 2020, the health crisis hits Asia hard and the shock wave is spreading in Europe and the United States. Everywhere, the sanitary restrictive measures are screwing up the production volumes of goods and services and world trade is experiencing a historic fall.
Faced with the magnitude of the shock, the sea freight market is getting organized. Container carriers and producers are reducing their fleets on trade routes by 30%. Ships remain anchored off inexpensive ports like Aberdeen in Scotland. The containers are not picked up and pile up, empty, in major freight ports. Faced with the shock, large companies in the sector stabilize prices by reducing the supply of containers, a strategy facilitated by multiple consolidations in recent years.
Global demand rebound
Subsequently, global demand recorded an unexpected rebound in its intensity. The massive stimulus plans launched by the United States and Europe are causing a strong demand for goods, especially electronics. The savings accumulated by households and the massive recourse to teleworking are promoting the growth of e-commerce. Americans and Europeans order online material mostly assembled in Asia. After several months of reducing their orders, companies are starting a significant restocking in order to anticipate the recovery.
But the carriers, who fear a recovery in “flash in the pan”, relaunch their links only very gradually. This caution leads to a shortage of containers and mechanically to a surge in prices. Currently, the price of a forty-foot equivalent container, standard unit, is negotiating around 5,000 dollars (4,100 euros) on average, an increase of 234% compared to 2019, according to the maritime consultancy firm Drewry. The index World Container Index shows a continuous increase in prices from the second quarter of 2020. It is above all the market prices of the “spot” that have soared, that is to say the contracts that are negotiated with each shipment and not in the long term.
Too low production
The imbalances in prices are amplified by the fact that the production of new containers is too low in relation to the number of containers discarded each year. Indeed, constantly on the road, they wear out quickly and only remain in circulation for about fifteen years, on average, before being recycled. While production growth (between + 6% and + 8%) is certain for 2020, it cannot compensate for scrapping. The result is a decline in the number of containers, accentuated by the lag effects of production slowdowns in 2019.
Acceleration of production is impossible, with China’s three largest container manufacturers facing steel and aluminum shortages. The health crisis has also played a major role. Without visibility on the market, steelmakers belatedly relaunched production that was generally slow to regain its cruising speed. Except that in the meantime, the Chinese recovery has boosted the demand for metals. For many observers, this deficit of supply relative to demand is likely to continue this year as the recovery is now global.
Traffic jams in ports
Beyond the imbalances between supply and demand, the health crisis has caused an unprecedented desynchronization of the pace of work between the economic partners. If Asia was the first to be affected by the pandemic, it has on the other hand reconnected its economic machine more quickly. So, while China resumes its exports, Europe and the United States are still confined. Consequence: American and European ports are hit by a labor shortage of dockers or truckers. The ports no longer have the capacity and end up overwhelmed by the resumption of Asian exports.
The delays accumulate with domino effects in the chain. The shortage of truckers is disrupting inland transport lines, unloaded containers return less quickly to the port to be loaded again. The result: dozens of container ships are parked off the port of Antwerp or Los Angeles, waiting to be unloaded there.
A boon for carriers
This unprecedented surge in prices is doing the business of carriers. The Danish giant Maersk posted a turnover up 30% in 2020 compared to 2019. The Marseille-based CMA-CGM for its part posted a turnover of + 25% between the fourth quarter of 2019 and 2020. According to the Consulting firm Alpha Capital, the sector is said to have amassed $ 15 billion in profits, 50% more than in the previous five years. And there is no indication that this dynamic should stop. The year 2021 even opens under the best auspices for the world leader, Maersk, with a record net profit in the first quarter (2.7 billion dollars, against 209 million a year earlier).
But the benefits of some come at the expense of others. European consumers could thus suffer price increases of 9%, according to calculations by the Oxford Economics firm. For a refrigerator, this additional cost could reach 21%. Others, like the European Union of Container Shippers, have trouble digesting the good health of the transport sector. The union, which brings together professionals entrusting goods to be transported, calls for an investigation by the European Commission on the prices charged by carriers in 2020. The latter defend themselves from any strategy on prices, arguing that they are only the reflection of the law of supply and demand.