Disruption Report #19: Christmas May Be a Challenge, and Some Additional Reasons for the Shipping Logjam

By: Richard Gottlieb, Global Toy News

More than 360,000 empty containers were shipped from the port of Los Angeles last month.”

Get Ready for Years of Chaos in Container Shipping, “David Fickling, Bloomberg Opinion


The Supply Chain Mess: Its More Complicated Than We Thought

Bloomberg writer, David Fickling, does an exellent job of explaining some of the nuances of the supply chain mess in his article, “Get Ready for Years of Chaos in Container Shipping.” Here are some of the points he makes:

  1. Containers are not in the right locations. There have been too many containers sitting in Europe and the U.S. and not enough in Asia. That’s why it’s been so hard to get a container in China.
  2. Empty containers are, as a result, being shipped to China. Shipping an empty container is all cost, and those costs are being passed on to companies importing products from China.
  3. In 2019, President Trump threatened heavy tariffs on Chinese products. Those projected tariffs spooked container shipping companies because they anticipated a decrease in shipping. As a result, those companies cut back on investing in new ships and containers. Though understandable then, it is a disaster now as the shipping companies currently do not have sufficient capacity. Here is how the Bloomberg article puts it:

The freight industry has been cutting back on investment in anticipation of a global economy in which trade would be playing a smaller role. Since March 2019, Maersk’s capital investment has come to just $2.9 billion, not much more than it invested in a single quarter during 2014. That’s a problem that will take years of building new ships, berths and port loading cranes to fix.

4. In the past, when there was a shortage of containers, companies would order their ships to sail faster. That no longer works because the new mega-container ships are slower than their smaller predecessors. As the article puts it: “The latest generation of mega-vessels save energy and costs by having top speeds of around 18 or 19 knots as opposed to 24 knots in the 2000s.”

5. If you had any doubt, the shipping companies are doing very well. “Analysts expect Maersk to make more profits this year than in the previous seven put together.”

If Christmas Is a Problem, Blame Coronavirus and the Port of Yantian

In his article, Wall Street Journal writer Costas Paris, “Chinese Port Logjam Threatens Christmas Shipping Rush,” warns that Christmas time could be a mess for retailers and shoppers. He blames it on the Coronavirus crippled port of Yantian. This port that is extremely important to the toy industry as it services the toy manufacturing centers of Hong Kong and Shenzhen.

Shipping executives say around 50 container ships remain backed up around the Yantian port in Southern China and that some 350,000 loaded containers are stacked up on docks as the major gateway for China goods heading to Western nations struggles to recover from a Covid-19 outbreak that disrupted operations there.

Who is exacerbating the shortage in containers; Mr. Paris says it is Walmart and Amazon?

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