Troubled waters in the logistics sector in 2021 (1)

  • Today, we are going to talk about the Chinese container crisis: a global problem for international trade that comes at the worst time. You must get ready for it.

  • If you have noticed that it is getting more and more expensive to import from China, it is not something that has to do exclusively with your supplier. This is a real challenge facing the entire market globally, and is not just an eCommerce or retail issue.
  • The weight of Chinese producers

  • Before going into all that is happening, it is important to reflect on how we have reached this point.

    China has gradually become the main supplier to almost every market in the world. Its factories are working at full capacity, and this has led them to become the world's largest exporter and the second largest global importer.

    In figures, in 2019 imports from the Asian country reached $2,499.4 billion according to reports from Santander Trade. That is millions of textiles, electronics and every other industry you can imagine.

    Its main trading partners may be the United States or Japan, but the truth is that the entire international network depends on its production and logistics capacity. Another revealing fact in this regard: more than 50% of Amazon's sellers in Spain are of Chinese origin at the same time in 2019.
  • And the pandemic arrived

  • As you may have noticed we are providing data from 2019, and it is not by chance. You know firsthand how the COVID-19 health crisis affected economy, and if there was one country particularly hard hit at its onset, it was China.

    The epicenter of everything that shook the world began in Wuhan. It is not just any place: its importance is paramount in the Chinese economy because it is one of the country's major distribution centers, the cradle of metallurgy, textiles, automobiles and consumer electronics. Stopping Wuhan, in short, meant leaving Chinese industry seriously weakened.   

    Then, we know what happened: the whole country came to a halt and, progressively, the rest of the international markets.

    In terms of logistics and distribution we are talking about, we can say that this global stoppage did not have an immediate effect. Moreover, the first country to begin to recover the course of its activity in a more or less normalized way was precisely China, so nothing foreshadowed a logistics crisis like the one we are currently experiencing.
  • What is the Chinese container crisis?

  • We are facing an unprecedented situation that has caused the cost of maritime transport to rise exponentially. More and more is being paid for the containers themselves and freight rates have reached record highs.

    Shipping a 40-foot container cost $2,000 just a year ago. Today, it can easily reach $20,000.

    To reach this situation, there are different factors that must be analyzed independently, but which, as a whole, are the triggers of the current Chinese container crisis.
  • #1 – Excessive dependence on China

  • We have talked about this at length before reaching this point, but the fact is that it is the main factor.

    Faced with a mismatch such as the one that has occurred, the world's supplier finds that it cannot meet the demand that is produced. Economies are reactivating and need goods produced in China.
  • #2 – E-commerce boom

  • We know that eCommerce was growing at a great pace before coronavirus. But the confinements and the fear of contagions that have followed have driven this channel above any forecast, reaching 25% higher than the same period before the pandemic and with many niches growing even in confinement.

    That upward inertia may have moderated, but it has not stopped. New users have joined the channel and the recurrence of those who were already buying online has grown.
  • #3 – Not enough containers or ships

  • As a result, China is breaking records in terms of demand and volume exported: in July they were 32% higher. Despite the country's enormous capacity to produce and supply, they also have a limit.

    In this vicious circle in which we find ourselves, it turns out that the main container manufacturers are in... indeed: in China. Three companies in that country produce 80% of the containers used worldwide.
  • Even so, they could not be shipped at the pace demanded by the market because there are simply no ships to transport them. In the first half of 2021 alone, 9 times more vessels were manufactured and the sale of second-hand boats is absolutely unleashed.
  • #4 – Ports are no longer able to cope

  • Even if the goods reach their destination, the different ports have to guarantee the traffic and management of the goods received. Space, time and resources are limited and cannot be scaled indefinitely.
  • Nor has the famous Suez Canal incident helped. That week that remained impracticable due to the stranded ship meant delays in addition to those already being generated by the other circumstances mentioned above.
  • #5 – COVID has not disappeared yet

  • The incidence  is more than remarkable. Whenever a new outbreak is detected in China, the authorities are really strict with the measures to be taken. This means that on many occasions activity in factories or ports is temporarily halted because of coronavirus.

    In a coming post of this series we will talk about the consequences this is going to have in the near future. Let's not forget that we are only 3 months away from the expected Black Friday, Christmas and sales campaign.
  • Are you experiencing problems due to the container crisis in China, and are you taking action? Tell us how this issue is affecting you, we would love to hear your point of view.

  • Images | Unsplash.

Miguel Nicolás

Miguel Nicolás O'Shea is a life-long copywriter (more than 15 years working in agencies) and a specialist in Search Marketing (SEO and PPC). From now on, he will contribute with his online marketing experience to Oleoshop, publishing regularly.

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