No Containers, No Space, No People: The Three Shortages of 2021

On June 15 I quoted freight to Mohamed in Tanzania: Nansha to Dar es Salaam, 40-foot container, US$6,200. He was silent for ten seconds on the phone, then said: this time last year you quoted me 2,400.

I told him last year was last year. Anyone in logistics this year wakes up to three shortages: containers, space, and people. This piece explains the three, and gives our customers an accounting: it is not us raising the freight.

Shortage One: Empties Are Not Coming Back

Containers move in a loop. Chinese cargo goes out; the box lands in Africa, gets loaded with sisal, cashews, or cotton for the return, and only then can it be used again. Starting in the second half of 2020, that loop broke.

Ports in Europe and America clogged up, ships sat at anchor for half a month, and boxes got stuck on board. In Africa it is more direct: exports cannot fill the return legs, carriers will not run empties, so they simply cut East Africa services.

The result: China ran out of boxes. At the worst point in April, we would book space but could not get a container. The forwarder would release a hundred boxes at 8 a.m.; by 7:30 the queue was already full. I had one container that took three days to pick up. The driver went to queue at four in the morning, and when his turn came, that day's boxes were already gone.

How precious did boxes get? In May, a used 40-foot box itself was bid up from US$3,000 to US$5,800. The box was worth more than some of the cargo inside it.

In early June something else happened. We had a loaded container, and the box owner suddenly wanted to reallocate it; the box was going to be pulled. Xiao Wang refused to leave the yard, argued with the container control office for two hours, and paid an extra 500 yuan to keep it. If that box had been pulled, the shipment would have slipped at least another ten days.

Shortage Two: Space You Have to Fight For

Few boxes, even fewer ships. Carriers shifted capacity to the Europe and America trades, where a single box was fetching over ten thousand dollars. The Africa trade became the neglected stepchild. Nansha to East Africa shrank from three sailings a week to one and a half, the half being an extra loader that shows up whenever it shows up.

How far did prices go? Nansha to Mombasa, 40-foot: US$1,800 last April, US$3,200 this January, US$6,500 quoted in June, nearly triple. And that is not the worst: to Lagos in West Africa, it broke US$8,000.

Booking space is a scramble. Carriers release space in the small hours, forwarders grab it in the small hours; miss it and you wait for the next round. After that shipment we guarded at the port for eleven days before Chinese New Year, the company changed the rule: book space the day the contract is signed; better to pay deadfreight than have no space. In the first half we paid deadfreight three times, US$4,600 total, but we protected every single delivery date.

In mid-June a peer asked me: with freight this high, are customers still buying? Yes. Equipment is a production asset; the site is waiting to start, so they buy even with expensive freight. But customers have started doing the math: where they used to buy three machines a year, now it is two; freight eats the price of one. Order count has not dropped much, but order size has thinned.

Shortage Three: Terminals Short of People

In early June a case appeared in the Nansha port area and terminal operations tightened. Drivers needed a nucleic acid test within 48 hours to enter, quayside work was split into smaller teams, and with fewer people, efficiency dropped thirty percent.

Ships waited at anchor for berths, three or four days at a time. On June 10 one of our shipments arrived but could not get in, waited an extra two and a half days, overran the free time by four days, and we paid US$720 in detention.

The labor shortage is beyond anyone's control. The terminal workers have it hard too, working in protective suits in thirty-plus-degree heat, goggles fogged with sweat. Customers and we alike can only wait; there is no rushing it. That day at the terminal I saw a worker sitting in the shade peeling off his suit; the clothes underneath could be wrung out like a wet rag.

How We Cope

Three shortages, three changes.

One, consolidation. Two or three small machines share one container, spreading the freight. This year our consolidation ratio went from twenty percent to fifty-five. Customers wait a few extra days for a sailing and save a third of the freight. Mohamed's two excavators in June shared a container with a shipment of solar PV mounting structures; he saved US$2,100.

Two, multi-port routing. No space at Nansha, go via Shekou; nothing at Shekou, go via Hong Kong by barge for transshipment. In April, four of our shipments routed through Hong Kong; the transshipment cost extra, but we saved on demurrage. Three, watch the free time. Now when we book, we first ask how many free days come with it. Seven days, we will not book; we look for fourteen.

Transparent freight quotes. On the quotation, the machine price, the freight, and the port charges are listed separately. Freight is collected by the carrier; I cannot control its rise and fall, but I do not make a cent on it. Take my freight quote to any forwarder you like; if it does not check out, come back to me.

Every Monday morning I update the freight on major lanes and send it to all customers in active talks. If it went up, I write that it went up; do not wait for the customer to ask. Customers are not afraid of price rises. They are afraid of being quoted one number and billed another.

These three shortages will not end within the year. Customers planning to buy: budget freight in full, and budget time generously. I will get the cargo ready and grab the space early, but do not push the ship. The ship is not mine to command.