Supply chains choke as container shortage persists

Published December 30, 2020
A view of Pakistan Deep Water Container Terminal at Keamari is seen in this file photo.
A view of Pakistan Deep Water Container Terminal at Keamari is seen in this file photo.

KARACHI: As economies around the world emerge from the Covid lockdowns, a new challenge has tripped up supply chains everywhere. A dire shortage of shipping containers in some countries matched by an oversupply in others has created awkward bottlenecks all over the globe, with Pakistan hit particularly hard.

“There is a material shortage of containers, and it will take us till March to sort it out,” said Mohammed Rajpar, Chairman of the Pakistan Ship’s Agents Association. “The crunch began back in September but has shown no signs of abating,” he added.

As shipping lines around the world came to a halt, some countries were left with a surplus of containers and others with a deficit as vessels were laid off at the nearest ports where they could be stowed safely at the lowest cost. Getting global shipping lines to restart is proving more challenging than what was imagined at first.

In the meanwhile, costs of freight have skyrocketed, in some cases forcing importers to cancel certain orders. Exporters are also hard hit by the crisis.

Growing demand driving up shipping costs

“Freight rates have gone up by two to four times and in some cases as much as 8 to 10 times,” Rajpar told Dawn. “We used to be able to send cargo to China for $400-$500 which now costs $4,000. Cargoes to US used to go for $2,500 and they have gone to $4,000-$5,000” he said. Although, he adds, rates can vary depending on volumes.

Pakistan Association of Automotive Parts and Acces­sories Manufacturers Chairman Abdul Rehman Aizaz said sea freight charges from Far East and China has swelled to $2,500 per 20ft container in the last few months from $500 in just four months.

He said due to lockdown in Europe and North America, return of containers to China and other Far Eastern countries were getting delayed resulting in shortages and price hike.

In Pakistan, he said, containers from Far East and China used to arrive in 19 to 24 days, but now they are facing a delay of seven to 15 days. “This delay and port congestion situation at various ports may exist till February 2021 in view of the gravity of the situation at the foreign ports,” he said.

Indus Motor Company CEO Ali Asghar Jamali has a similar story. “Due to congestion at international ports and supply chain issues, we are facing a delay of 15-21 days in getting raw material, parts and accessories for local assembly of vehicles from various foreign destinations,” he told Dawn.

Some industries are less affected because their imports arrive in special purpose vehicles that always return empty in any case. Examples are soyabean or coal. The cement industry, for example, imports coal but relies on containers for export of cement. Coal imports have been impacted by port congestion, but cement makers told Dawn that the shortage of containers has hit their industry as well.

Council of Textile Association Chairman Zubair Motiwalla said freight charges from China and other countries have risen to $3,200-3,400 per 20ft container from $700-800 from a few months ago.

He said various Chinese ports were stuck and containers were unavailable while the ports in the USA especially ports in America were facing congestion due to overflow of containers.

He added that “both China and the USA have geared up efforts to resolve supply chain issues triggered by port congestion but I think this will take another month to resolve.”

Association of Pakistan Motor­cycle Assemblers Chair­man Mohammad Sabir Sheikh anticipated raw material crisis in March and April if the supply chain issue led by shipping crisis was not resolved. He said export destinations were short of containers and while import destinations were flushed with empty containers.

Published in Dawn, December 30th, 2020



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