Container shortages and congestion at Asian ports are reminiscent of episodes seen during the pandemic.

Longer route distances and rising demand negatively impact both dynamics.

The peak shipping season arrived earlier than expected this year, and with Red Sea rerouting squeezing shipping lines' capacity and delaying schedules, port congestion, container shortages, and high freight rates continue to worsen. No, this isn't a look at the pandemic's fallout in 2021 and 2022; it's the latest report from Judah Levine, Head of Analytics at Freightos, on the current state of the maritime industry.

Levine estimates that around 7% of global capacity is tied up by congestion. The worst case is Singapore, where diversions have increased transshipment volumes to destinations in the Middle East and the Red Sea, or within Asia. Shipping lines are skipping calls at some ports to adjust their schedules. The situation is so dire that Singapore, the world's second-largest port, is reactivating an unused terminal to handle the more than 40 vessels waiting up to seven days to dock. Other ports in Asia, such as Jebel Ali in the United Arab Emirates and Shanghai/Ningbo in China, are facing similar problems.

Container shortage

Container shortages are always a threat in the maritime industry due to the nature of international trade. China exports far more than it imports, while the United States and Europe import more than they export. This means that approximately one-third of the world's containers travel empty only to be repositioned and restart the cycle of transporting goods.

This common problem has now intensified due to stronger-than-expected demand. Furthermore, with the rerouting around the Cape of Good Hope, ships are spending more time at sea, reducing capacity and available containers. "You simply need more containers to transport the same amount of goods," explained Rolf Habben Jansen, CEO of Hapag-Lloyd, last month.

The consequences of these longer empty container transport and repositioning cycles are evident. "We are starting to see clear signs of container shortages, which, combined with port congestion, is reminiscent of the Covid years," said George Youroukos, CEO of Global Ship Lease Inc., according to Bloomberg.

The result is that equipment is not returning to China as quickly as operators anticipated. According to Ligentia, a supply chain management company, "almost all" shipping lines operating in Shanghai are short of empty containers. Worse still, according to Bloomberg, this shortage could "become even more pronounced in the coming weeks and months," warned Constantin Baack, CEO of MPC Container Ships ASA.

This whole situation creates a vicious cycle: ships sail longer due to rerouting, which reduces capacity and available containers; the repositioning of empty containers in Asia is delayed; ships accumulate waiting to load full containers at ports, but there is no equipment to restart the cycle, which further reduces available capacity; and so on. All of this leads to a single effect: rising freight rates.

Solutions?

An obvious solution would be to expand the container fleet with new units. Currently, almost all of the world's containers are manufactured in China, and according to Bloomberg, the Asian country is rapidly increasing production; factories produced almost the same amount in the first five months of this year as in the same period in 2021. However, "most factories are fully booked to receive significant orders until the end of the [northern] summer," warns John Fossey, head of research for Leasing and Containers at Drewry.