According to economists and industry experts, here are the reasons why the shipping problems will persist in the coming year.

Whether it’s supply chain disruption, shortage of shipping containers or skyrocketing freight costs over the last year, Covid has caused many problems for the shipping industry. Unfortunately, experts are now saying that some issues will linger well into 2022 – here are the reasons why.  

Backlog at International Ports 

Massive ships can deliver more per voyage for sure, but not all ports are made to accommodate ships of that size, such as the ports in Los Angeles and Long Beach seeing some ships carrying billions worth of goods that are looking to find a way into the American ecosystem. 

With prices for consumers and wholesale goods are soaring, an inflationary holiday season is expected. Shipping a container through major US ports now take triple the time it normally would. In fact, Ronnie Walker, Economist at Goldman Sachs, noted that these backlogs and elevated shipping costs are likely to persist through at least the middle of 2022. 

Heavy Renovation Costs 

On the other hand, ports that have undertaken dredging and renovations to fit larger ships are incurring huge costs. For example, the Port Authority of New York and New Jersey spent USD1.7 billion over six years to raise the Bayonne Bridge an additional 215 feet to allow passage of bigger ships. However, all these works are a slow process that not only take a long time but will continue to impact the global shipping industry in the years to come in the meantime. 

Freight Cost & Marketing Challenges

It is known that the shortage of shipping containers stemmed from 2019 being a poor year for trade, leading to a production slowdown in 2020. However, demand continued to explode instead of shrinking and raising the cost to import and export certain goods. 

Cameron Gordon, Chairman of the ASEAN Food & Drink Exporters Forum, has shared that two of the most major challenges facing firms exporting into ASEAN are freight cost issues and marketing barriers. As retailers are not willing to change the pricing of products since it would affect customer purchasing, most of these added costs (borne out of the pandemic) are absorbed by the distributors and brands themselves. 

In an interview with Food Navigator Asia, Cameron said: “This is a very big area of concern for companies, and we are discussing strategies to manage these increased freight costs to ASIAN markets.” 

As for marketing, exporters need to rethink traditional marketing to invest in digital marketing instead. Additionally, he recommended exporters to pay closer attention to their distributor selection to achieve local success. 

“This (post-Covid-19) period is a time to be practical by asking all the questions and understanding everything about the market thoroughly – it is not a time to rush into any decisions (especially regarding the local person who will be handling your products on the ground) when you can’t be there,” Cameron advised. 

Image Source: Tom Fisk from Pexels