How got here: global maritime trade misadjustment, the perfect storm

By 2 December, 2020 News
We present you with graphic information to try to explain the moment of imbalance that we are experiencing in world maritime trade. From Grupo Raminatrans we reiterate one of the principles of our company philosophy: Customer-oriented service, to continue working day by day taking care of each load and of all our clients, but we cannot ignore the context in which we are doing it, and that it looks like it will be extended, at least, until the Chinese New Year. 


The outbreak of the pandemic in China is the first trigger of the situation we are now going through.


The lockdown decreed by the Government of China causes the Asian giant’s economy to stop, something that in such a globalized economy will affect the main industrial regions of the planet. Weeks later, European governments react with restrictive measures that will bring with them the worst decline in world GDP that has ever been seen. The main western ports suffer from merchandise congestion, forcing many of them to create alternative spaces to store containers.


The lockdown measures are causing a collapse of international maritime trade. Shipping companies begin to apply blank sailings and reduce their offer of services due to the impossibility of filling their large ships, seeking to ensure their survival. The level of idle fleets worldwide in these weeks reaches record levels, something that will later help to stress freight levels.


The reactivation of the Chinese economy, and the rest of the economies weeks later, causes a massive increase in demand that catches almost the entire logistics chain by surprise. Countries like the United States and the European Union reactivate part of their imports, although without reaching the level prior to the outbreak of the pandemic. The case of the trans-Pacific route is especially significant, due to the increase in demand for retail products in the United States.


This increase in demand causes a notable rise in freight rates -which reaches 100% in a few weeks compared to the same week last year-, catapulting the costs of importing companies, something that will especially affect shippers with less financial muscle. Shipping companies maintain for the moment their strategy of containing the supply of cargo, concentrating goods in fewer ports and using larger ships, which lengthens calls over time.


The increase in demand also causes a lack of empty equipment with which to maintain the movement of goods on the main international maritime routes, especially between Asia, Europe and the Western Mediterranean. The lack of space on the ships prevents repositioning those containers, which further strangles maritime trade. In import, 40-foot high cube containers have become the new gold of commerce and in export, 20-foot containers.


The main consequence of this situation is delays in the delivery of goods, something reported by freight forwarders and loaders. Likewise, despite the fact that there are industries that have decided to change their stock management policy, some economic sectors are short of materials to continue their activity.