Maritime transport is essential for the world economy, because according to data from the Post-Pandemic International Logistics report of the Economic Commission for Latin America and the Caribbean (ECLAC), 84% of the volume of merchandise traded in the world travels by sea.
But recently this type of freight transport has been involved in a series of events that has been called container crisis .
Have you noticed that a lot of products have gone up in price lately? You may have seen a variety of items and consumer goods that even cost twice as much as they previously cost. Well, one of the causes of the increase in products is this call container crisis .
In short: it is not that there is a deficit in the number of containers , but they are concentrated in a few points and have even been without use for months, causing that in other countries, the production companies that export their goods do not find enough space to transport them. to the destination countries that consume them.
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What is the cause of the container crisis?
After having an idea of what the container crisis consists of What are the causes of this phenomenon that is affecting the world economy?
Restrictions due to the current Covid-19 pandemic. Many ships carrying goods were forced to cancel their voyages to reduce the rate of infections. This phenomenon of the container crisis It occurred mainly on the routes that go from Asia to Europe and America, in both directions.
On the one hand, according to information from the BBC, the vessels that transported goods from Asia to America and Europe, had to remain in those destinations without being able to return to Asia with the products they transported from these continents. Due to cutbacks in maritime traffic, containers were left stacked and unused in America and Europe.
On the other hand, in China, which has 8 of the 10 most active ports in the world, the shipment of goods to Europe and America had to be stopped, due to the strict measures that were implemented to reduce the contagion of Covid-19. .
According to the ECLAC report, the impact of the pandemic on the activity of maritime freight imply a decline of more than 3 years depending on the evolution of the transported cargo volume.
Typhoon season. Many Chinese ports closed during the typhoon season, increasing the number of vessels and containers detainees.
Lower production of goods. To avoid the contagion of Covid-19, many eastern factories stopped their operations, which implied a decrease in their production and therefore in the shipment of products, thus reducing the demand for maritime transport.
An accident in the Suez Canal. According to the information in the article The day given to sea transport blocked (published by the University of Deusto), on March 23, 2021 an accident occurred in the Suez Canal, in which the super ship Ever Given was involved. that transported a weight of more than 220 thousand tons in containers.
This vessel, owned by the Taiwanese shipping company Evergreen Marine Corp., was heading from Malaysia to the Netherlands. As it passed through the Suez Canal, it lost control due to its large dimensions, the weight it was supporting and the natural conditions of this single-track canal. The Ever Given ended up totally blocking it, so other ships were unable to navigate.
The blockade due to the accident lasted 6 days, enough time for it to affect maritime transport, merchandise trade and therefore the world economy, since this channel covers approximately 10% of world trade, as it is the direct connection between Asia. and Europe.
According to information in the aforementioned article, the Suez Authority estimated a preliminary amount of one billion dollars for everything that this accident involved: the transit fees that were lost during the days of the blockade and the damage to the canal, plus those that accumulated. for claims. . of the vessels that were detained for 6 days and the costs of repairing the Suez Canal.
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A problem that comes even before the pandemic.
The fact that containers have been concentrated in a few lines of companies since before the pandemic is another factor that influenced the current container crisis .
The data from the ECLAC report indicate that 80% of maritime container transport is concentrated in a very small number of large operators.
The process of concentration of the container sector has progressed between mergers and acquisitions: according to the ECLAC count, of the 30 companies that transported the majority of world container traffic in 1992, now only three groups control that 80% of maritime traffic principal.
These large groups that control maritime traffic have managed to achieve market power, which has generated pressure on the terminals to reduce the rates of their services.
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Who will be the hardest hit by the container crisis?
Given the shortage of space and containers to transport goods, many shipping companies and especially the largest maritime transport companies opted to increase the cost of freight, since this would allow them to compensate for the losses due to the lower demand for their services.
Worldwide, there was an average increase of 142% in ocean freight prices compared to costs in 2019. On routes such as the one that goes from Shanghai to Los Angeles, this increase reached 199% according to ECLAC data.
As mentioned in the same report, and related to the economic context historical above, increased freight costs goes beyond the cancellation of the freight port closures. The fact that the market for container transport is based on a system of alliances and consortia can control prices.
The price of ocean freight also increased because the largest importers resisting the increase in the price of freight from shipping companies they are renting their own ships to transport their goods, which implies a greater number of ships in transit. Ie higher traffic or shipping offer, but little demand for the limited availability of space and low production and shipment of products.
It is then that because of the scarcity of certain goods, either for lack of production or lack of transportation, prices are expected to continue to rise and that it is not possible to meet estimated demand items for this purpose. 2021. And how is understood, high commodity prices because of these situations end up being paid by consumers.
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The container crisis will affect certain sectors more
Although consumers are expected to pay the highest prices because of this container crisis , some companies will also be seriously affected by this phenomenon.
Small shipping companies. As seen before, the great shipping companies that can offer services abroad, that is, they have the capacity to transport large loads over long distances, they are imposing their rates, which leaves small ones out shipping companies , which cannot charge the same rates. Many of these little shipping companies , which according to ECLAC are mainly concentrated in Latin America, will be forced to stop operating due to the low demand for their services.
Production companies. Possibly many companies, not being able to market their products due to the shortage of transportation, see their production, sale, delivery of products and therefore their profits reduced. Even if they agree to transport with the high rates of ocean freight, their products will increase in price, so if consumers cannot buy them, sales will be reduced.
Small businesses or local stores. Given the increase in the price of the products, due to the rise in the prices of sea freight, some local companies or small companies will not be able to buy these products, so a drop in sales is expected that will eventually lead them to be in economic situations. difficulties or even to close. These closures will possibly lead to a reduction in the jobs generated and a lower consumption capacity.
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