The Fragility of Freight

When I tell people about my lifelong interest in sea freight, they look at me like I’m the boringest person in the world. But sea freight is of capital importance. Most of what you own was probably brought to you by a container ship. Because of this, the ongoing maritime supply chain crisis should concern everyone.

This crisis was triggered by COVID. The pandemic and its concomitant lockdowns caused demand for goods to collapse, which reduced the need for freight. In the second half of 2020, traffic of container ships decreased by between 5.62 and 13.77%. However, demand then rebounded unexpectedly: a rebound attributed to consumers falling back on online purchases as a way to cope with restrictions on their movements. Unable to go anywhere, many people also ended up saving a lot of money, which they then spent on consumer goods. Unprepared for these variations in demand, the shipping industry scrambled to get its vessels and containers at the right places at the right times. In July 2021, Grace Kay noted in Business Insider that there were a record 33 ships anchored off the coast of California waiting for a free spot in a harbor to unload (in normal times, having even one ship waiting is considered wasteful). This becomes worse when containers themselves are in short supply because they are either sitting on waiting vessels or at docks: in December 2021, Martin Farrer wrote in The Guardian that there was “a glut of containers in some ports in the US and Europe, but not enough in ports throughout Asia.”

China’s zero-COVID policy also had disastrous effects on freight. China is the world’s largest exporter of goods, and some of its harbors, like those in Ningbo and Shanghai, are among the biggest on the planet. In August 2021, the harbor of Ningbo was closed for two weeks after a single COVID case was detected, delaying the movement of hundreds of millions of dollars’ worth of goods. The Chinese government singled-out ports as the main points of entry of COVID into the country, making them targets for lockdowns. This month, Reuters reported that “the number of vessels awaiting docking in the outer anchorages of the Yangtze Estuary, Pearl River Delta, Zhoushan, and Qingdao port more than double the average of March 2021.”

The war in Ukraine has also aggravated the situation despite its remote location. To be sure, neither Ukraine nor Russia are central to the global economy, and the Black Sea cannot be compared to the East and South China Seas. Yet, when the world’s three biggest shipping companies suspended shipping to and from Russian ports, it sent ripples across the world. Moreover, cargo bound for many Ukrainian ports cannot safely reach their destinations. Marie-Béatrice Baudet, a reporter for French newspaper Le Monde, investigated the port of Constanta, in Romania, where Ukraine-bound containers now have to be unloaded. She witnessed the growing saturation of the harbor facilities as an additional 6-7,000 containers were diverted there each day, affecting the whole European logistical system.

But these two upheavals only aggravated a long-term problem. To understand how we ended up in this situation, we have to take a look at the actors involved and how they work.