A number of leading international transport workers have alerted global heads of a global freight system. This would be directly caused by the effects of the global Covid19 epidemic strictures. This information coincides with the suggestion by Jerome Powell, Federal Reserve Chairman, that high inflation is unlikely to end before 2022.
Need for steps to be taken to avoid global freight system breakdown
The International Chamber of Shipping (ICS), an alliance of mariners, teamsters and air service employees, recently sent a letter to government leaders attending the UN General Assembly. In this, the ICS stated nations and states must lift the ongoing Covid19 pandemic strictures and isolation rules that apply to freighting and shipping industry workers.
Should this not be done, the freighting across the world is likely to cave in. The letter went on to say that the international freighting network is starting to crumble due to the crushing pressure on freighting industry workers over the last two years. Listed below are the unions that were signatories to the ICS letter:
- International Air Transport Association (IATA),
- International Road Transport Union (IRU)
- International Transport Workers’ Federation (ITF),
The ICS consortium is the voice of around 65 million people employed in the shipping industry worldwide.
H3: Calls for WHO and ILO to speak at UN General Assembly
The ICS communication points out that, worldwide, freighting is suffering from a lack of labour. This is likely to deteriorate further due to more workers leaving. This ongoing attrition, the ICS writes, is due to the difficulties suffered by so many throughout the pandemic. This has caused enormous risk to worldwide shipping and freighting. The ICS calls on the WHO and ILO to speak to this problem at the UN General Assembly. It asks that all heads of state take real and urgent steps to avert this looming disaster.
Read up on how serious the US government is takong this issue on our blog Cargo ship congestion rises to Supply Chain Disruptions Task Force envoy.
International Chamber of Shipping right to warn UN of global freight system collapse?
Retail giants suffering from major global shipping problems
Leading traders that bring merchandise into the country have faced constant fracturing of shipping services worldwide over the last two years. This problem has, unfortunately, been worsening. with global freight disruption the past two years and this disruption has been getting worse. Richard Galanti, Costco’s CFO, reports the company has been confronting major problems, including:
- Longer hold ups at seaports
- Insufficient shipping containers
- Interruptions caused by Covid19 constraints
- Insufficiency of parts and basic resources
- Fiscal squeeze caused by rising costs for workers
- Insufficient transport vehicles and truckies
Costco, Galanti said, has hired freighters to carry its cargo on the Asia-North America route. This is to protect the retail giant from the problems that currently exist in the worldwide shipping industry.
Record numbers of trans-Pacific cargo ships held up
As of end-September more than 60 cargo ships, full of imported goods, are anchored off Los Angeles and Long Beach. They are held up, pending being able to unload export cargo from Shanghai and Ningbo in China. By September’s end the number topped 150 cargo ships.
Before the pandemic, there would be an average of one ship standing offshore, pending unloading. Similarly, in September there were many more cargo ships than normal standing offshore in Shanghai and Ningbo ports. At present more than 240 cargo ships are waiting to come into these ports. These numbers are unprecedented.
For more on this issue, read up on our blog Cargo ship traffic jam at California ports so massive it’s costing the USA billions.
Will the global freight system issues resolve themselves?
Gene Seroka, executive director of the Port of Los Angeles, has verified that there is a significant backup of cargo ships off the US coast of major ports of entry. He attempted to shed some light on the problem, saying, “We’re witnessing a pandemic-induced buying surge by the American consumer, the likes of which we’ve never seen.”
Consequence of supply meeting very strong demand
Not long ago, Jerome Powell, Federal Reserve Chairman, addressed a conference put on by the European Central Bank. The current inflation jump in the US is the direct result of insufficient supply vs big appetite. He said this is connected with the economy being opened up again, and that, having started, it will reach a high point then normalise.
Powell said it’s hard to predict how large and over what period the fallout from the Covid restrictions will affect the world. He said the jump in pricing now is directly attributable to the current supply logjam, but charges will normalise without intervention in due course. He said he believes the upwards trend will not end until 2022.
Huge jump in freight pricing China to US freight is not permanent
The cost of shipping cargo from China to the US has jumped more than 10 times since September, reaching an unprecedented high. Because of the global epidemic, shipping containers ex China are unable to turn around at the US unloading point. This has resulted in a massive bottleneck, with shipping containers not being rotated and lack of freight space.
Based on evidence, it previously cost between $1,000 and $2,000 to freight a 40 ft container from China to the US. Since September 2021 the China-US freight price has grown to more than $20,000 per 40 ft container. This ten fold price hike is unprecedented!
The Federal Reserve was not expecting the trends now existing to morph into a new inflationary era where the inflation rate stays up over a period of years. The did, however, believe that finding a path through the situation over the coming two years will be demanding. Their reason for this is that they consider the inflation will not be permanent; it will be as transient as the price hikes being seen in global freight.
Jerome Powell, Chairman of the Federal Reserve says current spike in US inflation consequence of supply meeting demand
Global freight system likely to struggle for next two years
The ICS feels the worldwide shipping network is likely to cave in, but they don’t state how this will happen. Clearly the entire global freighting sector is labouring as consumer confidence returns. Easing/lifting of restrictions on people working in the transport sector will undoubtedly assist in getting things under way again. Overall, worldwide shipping will return to something approaching normal once Covid-related stricture and isolations are lifted. This, however, will not be a ‘quick fix’. It would appear Jerome Powell’s prediction of it taking two years is appropriate.
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