SHAFFE recently shared a report regarding the outcome of the exchange of Produce Coalition with the World Shipping Council to discuss current cost hikes and supply chain disruptions as well as potential solutions.
Key messages from this exchange:
- The World Shipping Council (WSC) is a trade association, which represents 90 % of the world’s liner vessels with offices in Washington, Brussels, and Singapore
- WSC underlined that global shipping has experienced an unprecedented number of shocks due to the pandemic and other global issues such as the Ukraine conflict
- Additionally, the shipping industry is currently experiencing unprecedented demand after a period of volatility and low volume, resulting in a sharp drop in demand in 2020 followed by extreme demand peaking in Q3 2020 and beyond
- As a result of the global pandemic and lockdown conditions, global supply chains experience an unprecedently high demand for recreations goods, vehicles (surges by 35%) and electronics, from China to the U.S.; additionally, trade continues rising globally
- Cost increases have been not only a result of surges in supply and demand but also a result of high spot market rates, port congestions and inland issues as well as bidding wars
- The Shipping industry invested in the maximization of capacities:
- Currently, all vessels are deployed, and even old vessels redeployed
- Newly build capacity and currently placed orders (the largest since 2008) should be in service from 2023 onward
- WSC is convinced, that any additional capacity of ship types will help reduce the current capacity issues; any additional ship will help to take off pressure from the entire chain
- WSC underlined that port congestions are a key challenge for the shipping industry and are heavily impacting the movement of ships currently;
- The impact of Covid continues to impact labour and productivity; inland congestions due to a lack of trucks are also heavily impacting the current situation
- Port conjunctions and the continued surge in cargo result in empty containers which are not leaving port
- WSC predicts, that this situation will normalize once consumer demand normalizes and new containers enter the market, for 2023 4% increase in vessel capacity is expected;
- WSC underlined that the situation cannot be recovered by easy fixes; the shipping industry is also depending on the entire supply chain, and it is highly recommended to get in touch with other service providers along the chain; however, the WSC could not give an outlook or timeline when the situation will return to normal as even with more capacity the “traffic jams” remain; no considerations on the situation for perishable products in specific nor overall food products have been taken so far
- WSC insists that this is not a once off-issue, but every supply chain is different which means the produce industry needs to speak directly with the service provider to address any issues of destabilization.
Find the presentation Global Fresh Produce Coalition here.
For more information: worldshipping.org