Shipping Container Shortages Expected to Persist through February, Hapag-Lloyd Says

December 9, 2020

Shipping constraints at California ports, which have caused logistical headaches for the global almond market, are likely to continue until at least February 2021, according to the shipping giant Hapag-Lloyd AG.

Almond exporters, as well as other agricultural exporters, are reporting that the lack of shipping containers is preventing them from sending their product to clients overseas on schedule. This comes during a year when almond production in California appears on track to hit a record high. Export constraints are expected until the Chinese New Year in February, a spokesman for Hapag-Lloyd told Stratamarkets.

Shipping volume from Asia to the United States usually decreases during the Chinese New Year, after a buildup of economic activity leading up to the holiday. But even with some easing in February, the German shipping company expects that the first quarter of 2021 will be busy since demand for household goods is expected to continue to be higher than average until consumers can spend on services again, said Nil Haupt, the company’s senior director of corporate communications.

The increased demand for goods will depend on how quickly a Covid-19 vaccine is distributed. If the vaccine is widely available by early 2021, the pandemic could be over by May or June, Haupt said.  Once people can travel and go out again, demand for goods could ease.

“We will see, perhaps in the second quarter of 2021, the market will go down tremendously, and then there are too many ships,” Haupt said.

Almond Market Reaction

For almond packers, that is little consolation as they struggle to get product to their customers on time. Packers said shipping companies are postponing and some cases canceling shipments.

“There have been years with port strikes that have been rough, but never have we had this level of difficulty getting bookings,” a packer told Stratamarkets this week. “Shipping problems have been the theme of my conversations.”

Hapag-Lloyd, the fifth-largest shipping carrier globally, announced in October that it would decline some U.S. Agricultural exports, affecting products shipped in 40-foot dry containers.

Shippers are prioritizing customers with long-term contracts, Haupt said. Filling containers and sending them to China or other countries East adds 50 to 60 days. This includes the time it takes to load containers, unload them from ships, transport them to customers by train or trucks, the weeks the containers spend with customers, and finally, the time it takes for the empty container to travel back to port by rail or truck.

“This is why we have to decline some shipments,” Haupt said. “We have, of course, preferred the shipments of customers who have long term contracts or who have good-paying cargo.”

Shippers are unable to add additional capacity. There are no ships currently on the market to charter, and containers are sold out.

Not all agricultural exports are experiencing the same delays, Haupt said. The constraint is limited to dry containers. Refrigerated agricultural exports, such as strawberries, have not been affected to the extent dry goods have.

The factors that coalesced to cause the current shipping container shortages have their roots in the global pandemic, which has prompted people in the United States, as in other countries, to stay home more than usual.

Once government stimulus in the United States came through, Haupt said, people had money to spend, but they weren’t traveling or spending money on experiences like concerts and dining. Instead, people bought household goods such as electronics and furniture. In other words, goods from China.

“What we are seeing is that ships are really full,” Haupt said. “There’s not even space for a mouse on these ships.”

Ports are having extreme difficulty handling the surge of imports, causing delays. Haupt said 15 ships were waiting in late November on anchor in front of California’s Port of Long Beach because the port is full.

Sending Back Empty Containers

The bottom line is that ocean carriers are reacting to the economics of moving cargo back and forth, Peter Friedman, executive director of the Agriculture Transportation Coalition, told Stratamarkets.

Friedman said that freight rates moving East to West are anywhere from seven to 15 times the rate shipping companies can currently secure for freight moving West to East.

“So they [shipping companies] are saying, ‘Why waste our time loading export cargo?'” Friedman said. He added that the problem could begin to ease in the first quarter of 2021 but said it would ultimately depend on when U.S. imports start to decline.
“One thing that is pretty clear is that in the last year, nobody has projected imports accurately,” Friedman said.

On November 20, the Federal Maritime Commission opened an investigation to determine if the policies and practices of overseas shipping companies related to detention and demurrage, container return, and container availability for U.S. export cargoes violate U.S. ocean shipping laws.

“The potentially unreasonable practices of carriers and marine terminals regarding container return, export containers, and demurrage and detention charges in the Ports of Los Angeles, Long Beach, and New York/New Jersey present a serious risk to the ability of the United States to handle trade growth,” the commission wrote in a news release.