CAPE TOWN: Why even giant ships can’t solve the shipping crisis

CAPE
TOWN: Jared Chaitowitz has a fleet of
around 300 rental bikes in Cape Town, South Africa. He relies on a steady
supply of spare parts – from pedals to bells – to keep them running. But
there’s a problem.

“The
guy that supplies the tyres that we use on our bicycles, earlier this year gave
us a 10 to 12 month waiting period for new tyres,” says Mr Chaitowitz, of
Up Cycles. “It’s been stressful.”

The
pandemic sparked a global cycling boom
prompting an increase in demand for bikes whilst simultaneously wholesalers
have been stung by a worldwide shipping container shortage.

Mr
Chaitowitz is juggling multiple challenges to keep his business operating. He
is also waiting for a container with 50 brand new bikes from France, though he
says he has no idea when it will actually arrive.

And
months ago, a local business asked him to repair some bicycles earmarked for
donation to charity. That charity work is on hold because Mr Chaitowitz can’t
get hold of the components he needs.

Mr
Chaitowitz has taken to sourcing spare parts where he can from local bike
shops. “A lot of times, they’ve been quite generous and able to help,”
he says. But it’s far from an ideal solution.

Mr
Chaitowitz is not alone, many businesses around the world have faced similar
logistical headaches lately.

Lockdowns
led to a massive drop in retail purchases,
followed by a sharp rebound as countries
started to open-up again.

At
present, hundreds of container ships are
queuing for access to overloaded ports, mostly in the US and China.

In addition,
in Europe and the US, lorry driver shortages mean it is harder to move containers on to their
destinations once on land. And port closures caused
by Covid-19 outbreaks have further exacerbated the traffic jam.

It’s
become common to hear stories about containers left idling on quaysides for
months on end. Plus, prices for containers are through the roof.

Sending
one 40ft container from Asia to Europe costs $17,500 (£12,650), more than 10
times the price of a year ago, says George Griffiths, editor of global
container markets at S&P Global Platts.

He adds
that some shipping companies are now charging premium rates to guarantee
delivery within a few weeks, for example, and that importers are also
attempting to outbid one another, offering extra cash to snap up containers
over their rivals.

“It’s
really starting to bite in the market,” says Mr Griffiths.

A perfect storm?

It all
begs the question – is this just a momentary supply chain blip, or a sign that
the great behemoth of container shipping can no longer keep pace with our
changing world?

The
container shipping industry is “creaking” under the strain of high
demand at the moment, says Rose George, author of Ninety Percent of Everything,
a book about the shipping industry.

“It’s
always been absolutely vital, it’s just never been noticed,” she adds.
It’s taken the current crisis to highlight how crucial shipping is to the
global economy,

Recently,
some big businesses have even decided to purchase their own containers and
charter ships independently in response to shortages. Among them, the US giants Walmart and Home Depot, and the Swedish
furniture brand Ikea.

A
spokeswoman for Ikea confirms that the company has bought additional containers
and chartered vessels in order to redress a product
shortage.

“We
have also sent goods by train from China to Europe and we have invested in
temporary intermediate warehouses in China, Vietnam, India, Indonesia, and
Thailand to support production,” she adds.

From toys
to cars, countless industries rely on shipping containers moving steadily and
continuously around the globe.

“I
have a gut feeling that… we’re going to see empty shelves,” says Stavros
Karamperidis, head of the Maritime Transport Research Group at the University
of Plymouth, referring to the Christmas period. The particularly severe lorry driver shortage in the UK could make
this especially pronounced in Britain, he adds.

Lorry
driver shortages are particularly acute in Britain, in part, due to EU workers
leaving the UK following Brexit as well as during the pandemic plus tax changes
making it more expensive for drivers from elsewhere in Europe to work or be
employed in the UK.

While
shipping firms are expected to make record profits
this year, to the tune of many billions of dollars, they continue to
be beset by problems.

“We
have deployed more vessels and containers than prior to the pandemic, yet we
still see unfortunate delays leading to missed sailings and missed
capacity,” says Concepción Boo Arias, a spokeswoman for Maersk, the
largest shipping container line in the world.

Delays in
ports are having knock-on effects on ship schedules, she says. A couple of
days’ hold-up at one port can end up adding two weeks to a container ship’s
total journey time.

The
current pressures are creating awkward situations – such as empty containers piling up at some ports while
becoming scarce in others.

So what
can be done?

Jack
Craig, head of global technical at APM Terminals, which is owned by A.P. Moller
– Maersk, emphasises the role that data and automation can play at ports. Automated checkpoints at Gothenburg in Sweden,
which scan every container coming into the port, have reduced idling times by
30%, he says.

But large
infrastructural interventions are tougher. A brand new container ship takes
about two or three years to build, so any vessels ordered now will not be able
to assist in the short-term.

Mr
Griffiths adds that uncertainty over how best to meet new regulations on
shipping industry emissions, expected in 2050, also means that some companies
are wary of expanding their fleets at present.

“It’s
a very costly mistake if you order 10 big container ships that might cost you
$100-200m apiece, if, come 2050, you can’t use them,” he explains.

For
decades, container ships have become bigger and bigger. The largest in the world today can hold nearly
24,000 TEUs (twenty-foot equivalent unit) – that would allow 24,000 containers,
each one 20 ft (6.1m) in length, to be packed on to a single vessel.

But such
ships require large, deep ports and giant cranes, which limits where they can
go. They also place heightened demand on resources at ports where they do call,
says Dr Karamperidis. He argues that a greater number of medium-sized vessels
could help to make supply chains more reliable in the future.

Marc
Levinson, an economist and author of Outside the Box, a book about
globalisation and container shipping, agrees that smaller ships are easier for
ports to handle.

Dr
Levinson adds that businesses may also have to rethink their reliance on global
supply chains that bring parts or products from single factories halfway round
the world. This approach can be cheap but it relies on everything always
functioning as intended.

“The
shipping crisis has really pointed out the riskiness of these kinds of business
strategy,” says Dr Levinson.

Ms George
goes further and suggests that we may all have to have a rethink on our
shopping habits. “I don’t know where it’s going to go,” she says of
the current situation. “But I do hope it goes more towards reduction of
consumption.”

And in
Cape Town, while Mr Chaitowitz entertains the idea of sourcing parts closer to
home, to escape the ups and downs of international shipping, he admits that
this probably isn’t a realistic solution.

“All
of the little things that go in a bicycle are made so cheaply in Asia, I can’t
see, locally, how we would ever be able to compete,” he says. “It
seems like we’re trapped in the system.”