Shipments by sea, why costs and delivery time are increasing

15/04/2021

More than 12 months have gone since the lockdown in China paralyzed the world supply. It seems that the shipments sector doesn't absorbed yet the blow, companies justify tariff increases of up to 200% and long delivery times only with the same reason: Covid-19.

Are we sure this is the only reason?

We have always thought that shipping by sea was safe and almost risk-free, because there was almost no probability that a 20-foot container could accidentally fall into the water. In 2021 it's time to change your mind.

Last February, the Maersk Eindhoven ship was sailing from China to Los Angeles with a full load of over 13,000 containers. A sudden loss of engine power in the very rough northern seas of Japan that day caused 260 containers full of goods to fall under water (source: Maersk official website).

In addition to the big pollution damage, tens of thousands of containers arrived late as the ship was forced to dock at a safe harbor to limit the damage. In addition, the precarious supply chain is hurting US importers and increasing shipping insurance premiums.

This kind of accident can happen, who is in this business knows that it's a risk that must be considered. The thing that causes concern is the frequency of these unpleasant inconveniences, which are putting more and more pressure on a distribution chain that is already at the limit.

The phenomenon of flying containers

To get an idea of ​​what is really happening, 1,382 containers were lost at sea between 2018 and 2019, based on World Shipping Council information. Between November 30 and February 15 (two and a half months), maritime insurers estimate that about 3,000 containers fell into the sea. The estimated losses are millionaires.

Most of the losses are in the US - Asia commercial route. The high demand for goods, caused by the pandemic, is generating continuous logistical blocks and significant delays on delivery times estimates.

Maritime investigations in progress

The authorities are conducting thorough investigations into this phenomenon. Even if the time expected to draw the conclusion is to long, there is a certain similarity between the accidents and the dynamics that led to the fall of the containers into the sea.

Transport insurers claim that ships always leave well loaded, regardless of the expected weather conditions. It is possible that the transport companies want to avoid deliveries delays, consequently they deliberately ignore the weather, the sea conditions, the safety of the goods and the crew of the ships. All of this will give higher profit for shippers and meantime a higher chance of accidents.

Climate change

Several storms have occurred in the Pacific Ocean during last months, resulting the main reason of containers falling in the sea.

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Meteorologists think that the increased wave height is an additional cause of the phenomenon. In fact, in 2020 and 2021 (till now) the wave heights in the Pacific were much higher than in 2017-2019. For example, during the New Year period there was a huge storm with waves up to 16 meters high.

These cyclones fuel the collision between cold air (coming from the north) and hot air (coming from the south). They also take power from the ocean, which in recent months has been warmer than the average of 0.5-3 ° C.

Larger storms lead to higher waves and therefore more maritime accidents.

Supply chain under pressure

Despite the meteorological conditions shown by the reports provided one of the major causes, it is not enough to justify the flying containers phenomenon. In fact, if bad weather were the only reason, the companies would have noticed it much earlier and could have remedied already, loading the ships less than their maximum capacity.

The additional cause of the flying containers can be the continuous pressure on the supply chain, which has been in difficulty since the summer of 2020. This stress has increased transport costs, delays in deliveries and ports congested by the workload. .

The situation is so serious that in Asia there are no more containers to be able to store the goods during transport, for this product prices increased and delaying the end of the pandemic.

Due to the rise in freight rates (and high profits), container lines have optimized space on ships. By increasing the volume in height, the greater the force generated by the movement of the waves, consequently a domino effect can be created that causes more than one container to fall into the sea.

Experts also note that port workers handle high volumes due to Covid-19 restrictions and many shipping operators have been forced to stay on ships more days than their contractual periods. Many call this a humanitarian crisis at sea.

How to limit the damage

The shippers hesitated to comment about the causes of the various incidents. However, they are stepping up controls on weight distribution, cargo declarations and storage plans. They also started research to monitor the movement of containers on ships and prevent them from accidentally falling into the sea.

The use of insured shipping is very recommended, as this is not a remote phenomenon. At now, half of the cargo of a ship is without insurance and considering the average value of the goods inside a container (about 50,000 euros) it worth to protect the investment.

About delivery delays, the are no solutions. One suggestion is to plan the purchase of the goods in time and to buy in larger quantities. In this way it is possible to reduce the number of annual shipments, and therefore the related risk.

Train way is a good alternative for shipments from China to Europe, keep attention about respect Incoterms conditions and the shipping agent provide the correct documentation.

Author: Alessandro Ave

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