The Impact of Unanticipated Events on the Shipping Container Market

The Impact of Unanticipated Events on the Shipping Container Market


The Impact of Unanticipated Events on the Shipping Container Market

The shipping container market has faced many challenges in recent years, with unanticipated events causing dramatic shifts. The pandemic, port strikes, geopolitical conflicts, and incidents like the Baltimore bridge collapse have affected the pricing, availability, and demand for shipping containers. As these unpredictable events occur, businesses in the global shipping container trade are left scrambling to adjust to variable market conditions. This article will explore the impact these events had on the shipping container market and offer advice on how to navigate and survive potential market crashes.

The Shipping Container Market During the COVID-19 Pandemic

The shipping container market is a good benchmark of global trade, with container ships carrying goods across oceans to meet consumer demands. Shipping costs are generally stable, with occasional fluctuations influenced by fuel prices or seasonal peaks in demand. Before COVID-19, availability was seldom a significant issue, and logistics companies were able to ensure timely deliveries.

 

But in 2020, the pandemic disrupted the global shipping industry. Lockdowns, reduced production capacity, and a massive increase in e-commerce created unprecedented demand for shipping containers. Factories in key manufacturing hubs like China were shut down, causing supply chain disruptions, while ports faced labor shortages due to health regulations and widespread illness. Ships were delayed in ports, waiting for weeks to unload and reload cargo.

 

The result was an unprecedented shortage of available shipping containers. Prices surged to several times their pre-pandemic rates as businesses scrambled to secure containers for their goods. Supply chain managers faced delays, cost overruns, and operational headaches.

Smaller businesses were particularly hard-hit, as large corporations could outbid them for the limited container availability.

Infrastructure Failures

Infrastructure failures, while less frequent, can have an immediate impact on the shipping container market. A recent example is the Baltimore bridge collapse. The collapse affected the ability of ports in that region to move containers efficiently and resulted in shortages in availability. When local infrastructure fails, transporters must find alternative routes, which are often more costly and time-consuming.

Surviving a Shipping Container Market Crash

These are just several examples of events that have created an unstable market in the shipping container industry. While businesses can’t predict the future, they can be proactive in preparing for the possibility of a market crash.

Port Strikes and Labor Unrest

As the world started to recover from the pandemic, other disruptions began to impact the shipping container market. Port strikes, particularly in major trade hubs, have always been a risk factor in the shipping industry. However, labor disputes have recently become more frequent and more disruptive.

A strike at key ports on either coast of the United States can have a ripple effect on the entire shipping container industry. Cargo that cannot be offloaded on schedule affects container turnover and availability.

Labor disputes can take weeks or even months to resolve, further straining the shipping market. Businesses reliant on just-in-time supply chain models are especially vulnerable, as these delays force them to stockpile goods or pay higher prices for expedited shipping alternatives, leading to increased costs and lower margins.

Geopolitical Issues and Trade Wars

Geopolitical issues have also played a significant role in the ups and downs of the shipping container market. Trade wars, sanctions, and regional conflicts disrupt established trade routes and create uncertainty about the future of international shipping.

The trade war between China and the United States, for example, led to significant shifts in global shipping patterns. Tariffs on Chinese goods prompted some businesses to diversify their manufacturing sources, turning to countries like Vietnam and India. This created new shipping routes and logistical challenges. Additionally, sanctions on countries like Russia have caused further disruptions in shipping lanes, with certain markets now off-limits or requiring rerouting through more expensive, less efficient paths.

Piracy off the coast of Yemen, particularly in the Gulf of Aden, is another example of how geopolitical conflict can affect the shipping container industry. The Gulf of Aden is a crucial waterway connecting the Mediterranean and Red Seas to the Indian Ocean, making it a primary route for international trade. Due to piracy risks, shipping companies have had to pay for increased insurance premiums and armed security, all of which increases operational costs. In some cases, ships have had to take longer routes to avoid pirate-prone areas, impacting delivery times and supply chain efficiency.

Here are some strategies to consider:

  1. Diversify Suppliers and Markets: One of the best ways to protect against shipping disruptions is to diversify both your suppliers and your markets. By sourcing from multiple locations, you reduce the risk of being overly dependent on a single region or vendor.

 

  1. Build Strategic Partnerships: Strong relationships with shipping companies, freight forwarders, and other logistics providers can provide you with preferential treatment during times of container shortages. Businesses that have established partnerships are often given priority when containers are in short supply or shipping routes are disrupted. Andrei Popa, the founder of USA Containers, notes that “relationships with suppliers [during the pandemic] was crucial. Knowing where to go and who to talk to was key.”

 

  1. Invest in Technology: Technologies like supply chain management software and real-time tracking systems can help you anticipate and respond to shipping disruptions more quickly. By having better visibility into your supply chain, you can reroute shipments, adjust schedules, and minimize delays. Advanced analytics can also help you predict demand and avoid stockpiling unnecessary inventory.

 

  1. Build Up a Buffer: While just-in-time inventory strategies are cost-effective in stable times, they leave businesses vulnerable during periods of disruption. Building up inventory can help you continue operations when shipping schedules are unpredictable. Having inventory on hand helped USA Containers stay competitive during the disruptions caused by the Baltimore bridge collapse, and Popa notes that, even though the port strike only lasted a few days, the company was ready to supply containers to customers from nationwide locations if it had dragged on, and will be ready if negotiations fail following the January 15 contract extension.

 

  1. Monitor Geopolitical Developments: Stay informed about geopolitical developments that may affect your supply chain. By closely monitoring potential sanctions, trade agreements, or regional conflicts, you can proactively adjust your business strategies and avoid being caught off guard by sudden disruptions.

 

  1. Protect Your Finances: Consider securing financial protection through options like supply chain insurance or currency hedging. These options can help mitigate financial losses that come with unexpected disruptions, particularly when they lead to extended shipping delays or increased transportation costs.

 

While unexpected events like the pandemic, port strikes, geopolitical tensions and infrastructure failures might be difficult to predict, businesses can take proactive steps to protect themselves from the impacts of a market crash. By diversifying suppliers, building strategic partnerships, investing in technology, building up inventory, and shoring up finances, companies can navigate these challenges and emerge better and stronger when the market stabilizes. Adaptability, flexibility, and foresight are key to surviving and thriving in the unpredictable shipping container market.

Reprinted with permission from the National Portable Storage Association

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