The international trade of goods continued to rebound in the final quarter of 2020. Following the pandemic-induced sharp decline in the first half of last year, G20 international merchandise exports were up 7.2% and imports rose 6.8% in the fourth quarter.
The trade expansion was, however, more moderated than in the third quarter when exports and imports increased by 20.6% and 16.8%, respectively, the OECD reported.
The unprecedented surge in trade activity as companies restocked their inventory and consumers returned to spending both online and offline has stretched the capacity of international shipping companies.
Soren Skou, CEO of Maersk, the world’s largest container shipping firm, spoke of “significant bottlenecks” last month when presenting the company’s fourth-quarter results.
Although Maersk missed its own fourth-quarter profit expectations, the company maintained a cautiously optimistic outlook for 2021.
Maersk’s shipping volume dropped by 15% in the second quarter of last year but rebounded sharply as global trade increased 5% year-on-year at the end of the year. “That has caused a significant bottleneck in terms of lack of capacity and lack of containers, which have driven freight rates higher,” Skou told CNBC in February.
He added that the Danish company is now operating at full capacity. “So we are trying to deal with a surge in demand which is completely unprecedented, both a surge in demand because the consumers are spending, but also a surge in demand because a large restocking started, as large retailers actually stopped buying stuff in Asia in the second quarter of 2020 and well into the summer,” he said.
The exceptional surge in demand has led to bottlenecks in global supply chains and equipment shortages.
With many shipping companies decommissioning vessels and putting new orders on hold during the pandemic, there are now not enough ships to meet the demand.
The shortage in shipping containers specifically has caused massive increases in shipping costs and delays. India and China are most affected because their economies have rebounded faster.
For example, the freight rate from Chennai, India, to Hamburg, Germany, for a 20-foot container has risen from US$500 to US$1,800; to Felixstowe, UK, from $400 to $1,800 and to New York from $2,200 to $4,800.
More than 85% of global trade relies on container shipping.
While exact figures are hard to come by, there are an estimated 25 million 20-foot and 40-foot containers, the standard industry norms, circulating around the world with more than 5,300 vessels exclusively shipping container cargo.
To deal with the shortage, China has ramped up container production and India is looking at starting to produce containers. Until then ship shortages, congestion at ports, particularly on the west coast of the United States, and a lack of available crews, with an estimated 400,000 seamen temporarily unable to work because of COVID-19 quarantines and lockdowns, are expected to exacerbate the problem.