One of the main reasons why there is an increment in the world’s products prices is the container crisis. Due to this crisis the price of freights have increased immensely since the global pandemic due to Covid-19.
The container war is no joke, it is a real problem that we are facing and it is affecting every one of us. If you haven’t heard about it, pay attention because it is directly affecting your economy.
Take in consideration that over 90% of the world’s cargo is moved via ocean freight and containers are the main method to do it. Therefore almost every product that is sold in abroad market has an increment in their operation costs.
As it implies the whole world this has been catalogued as a crisis by several international news media. The crisis will probably affect Christmas sales in the entire world, which starts to raise concerns.
To have as a reference, before the pandemic took place; ocean freight from China to Ecuador rounded the $2000 mark. Nowadays there has been an increment of over 800% in the price for the freight. A ocean freight can cost up to $16,000. This has never happened before and it has industries terrified about it.
Container Crisis origin: Covid 19
The results of the Covid19 are just showing up. The economy took an important hit and we are seeing in first hand the magnitude of its repercussions. This hostile environment is a result of a lack of available space in vessels to take products to Asia. Knowing that China is the world’s biggest importer, it has deeply affected countries doing commerce with them.
There are not enough containers available in order to carry and fulfill the rising demand of products in China. During the first months of the pandemic there was a general blockage to commerce due to the close of borders.
With the border closed and people locked in their houses, the demand of products falls. Therefore, economy took a pretty important hit, a lot of companies had to close their operations so the maritime industry was also deeply affected. Fewer vessels where sailing, as a result less containers were moving around. This gave as a result the increase of prices that has lasted for more than a year.
This year with the immense efforts done by countries and vaccination plans, economy has started to re-activate. Demand of products are starting to increase once again however, there is not enough offer of vessels or containers to meet the demand. This makes everything collapse.
Unfortunately, some variants of the virus have surge. This adds up to the uncertainty of reactivating the economy to its fullest as it was before the pandemic began. A lot of the world’s ports, especially in China, operate with a lot of restrictions for safety issues. These restrictions often affects directly to international commerce because some ports have to limit their operations or even clos for days or weeks.
Everything we consume suffered an impact in their prices as the logistics costs represent between 15% and 20% of the products value. If the transportation is more expensive so does the product. The increase of the post pandemic containers demand and the inability to meet it is producing that vessels take on their more profitable routes. These routes are mainly between Asia and the northern hemisphere. That affects directly to the southern hemisphere, which are less profitable.
The container war is directly affecting the commerce especially for those emerging countries in the southern hemisphere. Ecuador and their neighbors are being limited in terms of availability of containers. This crisis has to be addressed directly by the authorities and to come up with a solution where we can get enough containers to transport our products and commercialize them abroad.