Anyone working in shipping during the pandemic was dumbfounded by the turn of events in 2020. The first half of the year was jampacked with surprises as the virus spread around the world, and the last half also took everyone by surprise as demand skyrocketed beyond any economic model’s prediction.
But the craziness didn’t stop in 2020. While demand and supply did a 180 between the first and last halves of 2020, the market continues to surprise everyone throughout 2021.
2021 Shipping Recap: The First Six Months
We’re firm believers that studying the past is useful for predicting and preparing for the future, and with the volatility of the current market, “being in the know” is more important now than ever before. So with that in mind, here is a short recap of the last six months of the shipping market.
You’re going to get really tired of the language, “record setting” by the end of this post, but there truly isn’t a better phrase to describe the first six months of this year. Month by month, demand continued to rise as imports flooded U.S. ports, and January was a wild month for ocean ports.
Consumer demand for bikes, electronics, furniture, and more spiked as the pandemic continued through the first month of 2021. These spikes in import activity caused massive congestion at San Pedro Bay where several ocean vessels sat at the ports of Long Beach and Los Angeles for weeks.
Also, January of this year brought about some of the highest spot rates seen in a long time. 20’ TEUs for Trans-Pacific spot rates hovered around $4,200 and around $5,800 per FEU in the East Coast.
One last ground breaking event of January this year was Zim going public at $15 per share – one of the first shipping IPO’s in a while.
February was pretty much a sustained continuation of the events of January. Peak spot rates for Trans-Pacific routes maintained their record highs as demand continue to soar. And as you might guess, Long Beach and LA were just as congested as they were in the first weeks of the year with container ships waiting up to several weeks simply to dock and unload cargo, putting undue pressure on US-based businesses attempting to stock inventory for consumers amidst massive ecommerce activity.
Strangely enough, ocean carriers were responsible for massive cargo loss in the months of January and February, losing several millions of dollars of cargo to sea during the record-breaking port congestion and market conditions.
Do we even need to remind you of the biggest event of March 2021? The infamous, meme-able Ever Given Suez Canal blockage happened on March 23, 2021, stuck for six days, blocking an estimated 350 ships and $9.6 billion per day (around roughly $400 mil per hour) of international cargo.
Unfortunately, while the Suez Canal blockage caused for some comedic relief on social media platforms such as Twitter, Instagram, and TikTok, it did cause massive delays in the shipping industry, and impacted shipments to Europe and the East Coast especially hard.
Luckily, three months into the year, congestion at the ports of Long Beach/LA started to lift a bit, with 20 vessels per day at anchor. However, the congestion still proved to be some of the worst seen in a year-by-year comparison.
April to May
These two months were kind of a blur, and we’re sure you can relate. Due to the massive congestion caused by the Ever Given Suez Canal blockage, freight rates actually continued to rise. The difference between supply and demand was exasperated by low vessel availability as a result of 350 ships being delayed in the canal, and carriers scrambled to make as much space available as possible for other shipments. Naturally, rates continued to climb through both months and caused quite the headache for U.S.-based importers trying to restock inventory as well as prepare for upcoming peak seasons.
This capacity crisis has caused bookings to be scheduled out more than a month ahead, making it near impossible to short-term plan international shipments via ocean.
While Long Beach and LA were hit hard, Oakland port is now suffering massive congestion, pushing delays up to a month out. Unfortunately, the low container and capacity availability combined with ever-increasing consumer activity has led to multiple ports around the U.S. to experience record-breaking congestion levels.
As you might have guessed by now, this massive increase in ocean shipping activity has been the cause for major gains on the part of ocean carriers. Several ocean carriers reported earning more in the first three months of 2021 than in the entire previous year (which is saying a lot given the record breaking volumes in the back half of 2020.)
Ah, a moment to relax – port congestion is easing a little bit at Long Beach/LA, the Suez Canal is open. What else could go wrong? Certainly not a gantry crane collapse in a Taiwan ocean port at the hand of the OOCL Durban ocean vessel… but oh yes, it happened – and it was perhaps the last straw for many shippers actively shipping along that route. The damage of the gantry crane that collapsed, as well as another gantry crane that was damaged in the incident came out to an estimated $21.6 million.
Even more news on that side of the world – in June, China experienced yet another COVID catastrophe when an outbreak happened at the port of Yantian. Multiple workers were out sick, and port officials heavily restricted activity at the port, leading to massive congestion and delays. Industry experts have stated the delays at the Yantian port could cause a ripple effect through December months. An estimated 90% of the world’s electronics are shipping from the Yantian port, and June is a busy month for international ocean shipping as businesses stock up on inventory for end-of-the-year holidays.
After three and a half months, the Ever Given ocean vessel was finally released from Egypt after the government seized the ship until payment was made to accommodate for losses due to the congestion caused.
And lastly, rates continue to break record highs as West Coast spot rates for FEUs reach nearly $7,000, and have climbed over $10,000 on the East Coast.
While there’s no way to predict exactly what will happen in the back half of 2021, all factors are showing no signs of things slowing down. The need for capacity continues to increase, and the disparity between supply and demand is growing. Most shippers should expect rates to continue to climb, as well as be prepared to plan far in advance in order to get any capacity.
Working with a freight forwarder that can strategically plan far in advance is absolutely crucial right now. The days of hiring a freight forwarder as an ad hoc service provider are over – you need to work with strategic partners that can serve as a source of value in your logistics process. If you have any questions about your current shipping process, the international shipping market, or anything else, please don’t hesitate to reach out to one of our team members! We would love to help you and your team in any way we can!