The COVID-19 pandemic has had a much larger and unanticipated consequence to the global supply chain. From the supply shock that started in China in February, the demand shock that followed as the global economy shut down, temporary trade restrictions, and shortages of pharmaceuticals – the global logistic and supply chain had gone through a significant shakedown.
The War for Ships and Containers
Global competition for containers and shipping capacities has thrown a ranch in the global supply chain. Thailand can’t ship its rice, Canada is stuck with peas, and India can’t offload its mountain of sugar.
The reduction of the available containers and operational vessels is the cause behind the chaos. On the one hand, the pessimistic projection to the China economy at the beginning of the pandemic and the subsequent infrastructure investment that drove iron and steel prices to an all-time high made it economical to scrap old ships and containers rather than keeping them idle.
On the other hand, The western developed countries’ subsequent lockdowns and inability to recover from the pandemic has imposed a container stockpile in western ports, waiting to be unloaded, especially in the US. Meanwhile, China’s rapid rebound has triggered an explosion of dry goods shipping demand from China to North America, China-Europe rail freight is also soaring. The pressure is on to get containers back to Asia so that carriers can take advantage of these margins, empty or full. Asia to US and Asia to Oceania trade routes have become so lucrative that carriers aren’t waiting for cargo before sending containers back to Asia, especially when the freight isn’t available at the port.
This limited access to available containers is driving up the buying and leasing price of new containers. Chinese container manufacturers now charge around $2,500 for a new container, up from only $1,600 last year! Container leasing rates are up by about 50% in just six months.
Container shipping rates also surged on all East to West shipping routes since May 2020, with the highest rate upturn hitting the transpacific. Eastbound container freight rates have more than doubled since the beginning of the COVID-19 outbreak, eclipsing all historical highs. SE Asia to US rates has spiked from around $2,000 up to $4,500 per 40ft container. Shipping is one of the most profitable industries in 2020 and 2021.
Making the Vaccine is One Thing; Shipping them is Another
The race to end the global pandemic with vaccination is putting pressure on the global refrigerated logistics. The significant challenge for shipping vaccines is temperature control. Germany’s coronavirus vaccination campaign has faced delays in several cities after temperature trackers showed that some vaccines might not have been kept cold enough during transit. In China, one of the primary vaccine exporters, one company is already standing out. Cold chain solution provider Envirotainer has been in the spotlight, seen in Chinese vaccine shipments to Serbia, Chile, Turkey, and in other news reports.
Envirotainer refrigeration container uses an external power to keep the contents cold. Its size and power supply requirements are not suitable for rural areas in developing countries. A thermos, nicknamed “the keg of life,” capable of maintaining arctic temperatures for weeks on end without any power invented by Chinese company Aucma and funded by Bill and Melinda Gates Foundation along with Intellectual Ventures may be the answer to distributing vaccines safely for underdeveloped areas.
Global Logistic need to go Digital, Fast
Whether it’s freight forwarding or refrigerated transportation, a traditionally heavily relayed on human contacts and paper trail global logistics must face the challenges of a post-pandemic world because some things don’t change. Consumers will want to survive and want to have low-price goods (especially in a recession), and firms won’t be able to charge more just because they manufacture in higher-cost home markets or shipped them on high-cost routes.
The pressure to operate efficiently and use capital and manufacturing capacity frugally will remain unrelenting. The race is on for the global logistics companies to digitalized and be more resilient without weakening their competitiveness.
About the Writer
Dijia Xin is passionate about innovation and is an automotive enthusiast. Currently serving as the Client Success Director at Influence Matters, Dijia directs and oversees client strategy across our Beijing and Shanghai offices with a distinct focus on delivering success for clients’ business objectives.
With his rich experience in the innovation and media agency industry, Dijia was a Growth Marketer for Lab 1886/Daimler China Incubator. On top of that, he has worked with agencies such as SPRG and Blue Focus in the past. He has also served high-end clienteles such as Daimler, Startup Autobahn, Google, Qiantu Motor, and many more. With his strong background, professional work ethic, and leadership, it is for sure that his rich experiences will benefit our team and clients.
During his free time, Dijia hones his mechanic skills around motorcycles and crafts, while also caring for his cats at home. Reach out to Dijia by emailing him at dijia@inmatt.com!
