How Will We Be Able to Tell When the Global Shipping Crisis Ends?

The global shipping crisis has to be one of the top stories of 2021, and every day there are multiple stories about it and when it might end. There are many reasons it exists, so decomposing all of them to find the answer is not an easy task. However, there is one place – ocean import volumes – where we can see if there are any trends to provide guidance.

In the three charts below of container shipment volume (twenty-foot equivalent unit or TEU), we can see how demand for goods is up significantly from the pre-pandemic period. If there is no break in the import volumes by the 2021 holiday period and into early 2022, it does not appear that there will be any relief next year.

To get a better sense of where we are today, we will start with “normal” times - the four years preceding the pandemic.

Figure 1: Pre-pandemic “Normal” Years Comparison U.S. Import (TEUs)

These four years show a pretty consistent shipping pattern – a slow start to the year and increasing shipment volume as the peak season approaches and then a slight wind down in the last 2 months of the year. The decline at the end of the year and beginning of the next one is key to determining that ocean-based logistics capacity supply and demand are back in balance. The only exception to this pattern was the end of 2018 and beginning of 2019 when there was forward buying in advance of tariffs going into effect in 2019.

The pandemic years shipping volumes look completely different.

Figure 2: Pandemic Years Comparison U.S. Import (TEUs)

The start to 2020 was similar to previous years in that it declined but was lower in the first half of the year as China and other Asian countries shut down to slow the spread of COVID-19. However, in the second half of 2020, imports fully recovered and there was no slow down at the end of 2020. The volumes in 2021 stayed high in January with a slight dip in February that was still significantly higher than the same time in 2020. For the last five months of 2021, the import volume has continued to be quite strong.

Figure 3: Last 6 Years Comparison U.S. Import (TEUs)

When comparing the pre-pandemic and pandemic periods, it’s clear that once there was economic stabilization in mid-2020, the second half of 2020 eclipsed the pre-pandemic period and has continued unabated throughout much of 2021. Much of the increase in demand can be attributed to consumers spending on durable goods such as furniture, exercise equipment, electronics (which is ongoing) and the backlog of goods in Asia that began earlier in the pandemic.

Conversations with transportation industry operators validated that their businesses were at full capacity and that they were not expecting a decline in shipping demand from their customers through the rest of 2021 and well into 2022. They say that capacity is not able to keep with demand, resulting in containers stacked in Asia and high container “rolling” rates. In addition, the US West Coast ports continue to experience congestion with many ships waiting for a berth.

Assuming these points to be the case, the 2021 TEU volume should hover between 2.4M and 2.6M TEUs monthly through the rest of the year and the same will happen for 2022. Assuming there is no softness, the peak season in the second half of 2022 will drown out any decline we might see until November and December of 2022.

Ultimately, Importers should view the situation as more than a short-term problem. Descartes will be highlighting the U.S. Container Import Report on a monthly basis to give importers and LSPs a better view into the continuing global shipping crisis. In the meantime, importers should: 1) Plan to shift their movement of goods to less congested lanes; 2) Evaluate product mix to only focus on their high velocity SKUs for the limited transportation capacity available; and 3) Determine the viability of potentially late shipments for short peak seasons, like Halloween, where missing by as much as a month could result in goods that will miss their sell season.