The impact of COVID-19 on global supply chains


To our valued customers,

2020 has been a difficult year for supply chains to say the least.

The level of disruption to the container shipping industry could not have been predicted at the start of the pandemic, and a “perfect storm” has been created in the way of increased product demand, container shortages, capacity issues, record high freight rates and terminal/landside delays. We have worked closely with our partners and customers to navigate through this disruption, and provide the best possible service delivery that we can during this time.

Globally, vessel operators say the container shipping industry is under intense pressure due to the effects of the pandemic. Delays caused by lockdowns, quarantine requirements and changes to workplaces have created significant disruption to global trade, despite a huge demand for product.

In a recent article for Financial Times Lars Jensen, chief planner of services for Maersk Line, the world’s biggest container ship operator, said there was a “perfect storm” created by a mix of rising demand and reduced capacity in logistics systems. “There’s congestion in terminals,” said Mr Jensen, “There’s a shortage of truck drivers because some have not been able to drive. Particular out of Asia, we see a part of that is linked also to the fact that a lot of companies are restocking”. As a result “productivity slows down”, which “delays more ships, then we get a vicious circle”, Mr Jensen said.

Delays to berth at some ports have been widely reported. Earlier this week the Marine Exchange of Southern California reported 17 container ships waiting for berth at LA & Long beach, with only 3 due to move into port that day.

COVID-19 outbreaks have the ability to quickly and heavily disrupt a port terminal’s productivity.

“The entire supply chain is under pressure,” said Rolf Habben Jansen, chief executive at Hapag-Lloyd. “The market situation is extraordinary. We’ve had examples where in a port 600 port workers were put into quarantine… [Even] if that port was on top of its game, then within a week you have 10 vessels struggling to get alongside [the terminal’s quays].”

CMA-CGM last week it would not accept any new bookings until the last week of December to “hopefully, put us in a better situation for January”. But there is a concern that deferring orders would only contribute to the problem and create higher freight rates and space issues later.

When the pandemic first hit global trade declined at an unprecedented pace – seeing shipping lines cancelling hundreds of sailings. In the last few months as the world navigates through the pandemic, trade has rebounded and demand for product shipped from Asia is high, meaning that lines operating at close to or at capacity. A lack of available space combined with increased demand has contributed to a doubling of the rates as measured by the Shanghai Containerized Freight Index. Rates from Asia to the US west coast have increased to record highs. Additionally Mr Habben Jansen of Hapag-Lloyd said that despite boosting capacity by more than a quarter of a million containers this year “We had too many boxes in the wrong places because of disturbances earlier in the year”. This is further compounding the raft of issues the container shipping industry is currently facing.

It will take time for the supply chain to recover from the current conditions and we will continue to keep you all informed of the status of the industry.

If you have any questions, please contact your local SILA representative and we will be happy to assist.

We thank you for your continued support and understanding.

Thanks & kind regards

SILA Customer Service