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15 September, 2021 Industry News

Shipping Logjams and Massive Demand for Global Trade

Shipping Logjams and Massive Demand for Global Trade

Get insights into the most recent shipping news.

Executives from some of the largest US ports expect there to be shipping problems and logjams that extend well in the coming year, 2022, according to an article from The Wall Street Journal. The US ports are already suffering from congestion as on September 13, a record number, 56 vessels were stuck waiting to enter the Port of Los Angeles, but executives don’t expect the issue to be resolved soon, especially with the impending holiday season which usually is the peak of shipping in the US.

These intensive logjams have caused hundreds of thousands of containers to be stranded outside of the ports, and this exacerbates the already massive need to replenish inventories. Throughout the pandemic, inventories have been stretched to a minimum and now, demand for global trade is far outpacing the ability to refill stock. In an interview with CNN, Maersk CEO Søren Skou explains that essentially there are two main drivers of this increasing demand for global trade, one being the strong demand as a result of stimulus money that has been poured into consumers, especially in the US, and two, the inventory rebuilding cycle that is taking place. Skou goes on to say that, “in the second quarter of 2020, a lot of companies stopped buying in Asia, or really scaled down their purchases, because nobody knew where the world was going. We thought that we would have a major global crisis, but then stimulus came and demand came roaring back.” This has without a doubt played a role in the imbalance between supply and demand around the world.

With there being massive gaps between supply and demand, another point of concern with the shipping industry is the rising inflation. An article from CNN reports that according to Drewry, a maritime research consultancy company, a year ago, companies could expect to pay roughly $1,920 to rent a 40-foot steel container for a route between China and Europe, however, now this price has shot up to over $14,000, a staggering 600% increase. Maersk CEO, Søren Skou points out that hopefully as we “work through this period of extraordinary demand”, we can start to see a normalization in inflation.
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