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Can UK electronics manufacturers avert the global container crisis?

19 January 2021

For the many UK electronics manufacturers who import goods from the Far East, the transporting of freight by sea is often the preferred choice due to its cost-effectiveness and environmentally-friendly credentials.

Over the past few years the cost of sea freight has fallen substantially, there has been plenty of space available on cargo ships and the predictions were that transport by sea would remain a popular and affordable option for many years to come.

Currently though, the global shipping industry is facing a huge challenge due to the chronically short supply of one of their most basic and essential tools - shipping containers.

What's behind the container shortage?

Around this time of year we'd normally typically expect to see a rise in container demand due to the approaching holiday season and the disruption of the annual Chinese New Year factory shutdowns.
The current lack of availability of containers however is something that is quite unprecedented.

The impacts of the COVID-19 pandemic have been a hugely significant factor without doubt. Added to that there are also ongoing issues of reduced air freight capacity and a global surge in demand for goods which have placed immense pressure on worldwide shipping and container availability.
China, in particular, is struggling to meet demand as it awaits the return of millions of 40-foot shipping containers that have been left stranded or out of position in countries that import from Asia.

In a recent article in the online magazine This is Money, the director of operations at Mannson Freight Services in Essex, James Hardy, referred to what he described as the "collapse" of the global shipping trade in the wake of the coronavirus pandemic.

Demand is now running at "150 percent of capacity" he said, as customers rush to secure the few containers still available.
A problem that will persist into 2021 According to container lessor Textainer, it's a problem that is likely to be with us for many months to come.

Manufacturers are saying they are no longer able to fill orders for new containers - and carriers are responding to the equipment shortage by imposing surcharges that are leading to friction with shipping customers.
Shipping companies are being advised to keep a close eye on equipment availability, to scrutinise their container guarantees and to stay mindful of potential penalties or surcharges in the event that agreed turnaround times aren't met.

Shippers are also being encouraged to cooperate more closely with forwarders and trucking companies to ensure they are able to locate and secure available containers in sufficient time to shift their cargo.

So what is the container crisis likely to mean for UK electronics manufacturers seeking to import products and raw materials from China?

The impact on UK electronics manufacturing

The global container shortage is an issue that looks set to hit small to medium sized businesses particularly hard, as manufacturers face the prospect of higher import costs.

Two of the world's largest shipping lines have already brought in UK surcharges which are filtering down to UK businesses. One company has reported that it now faces a £1,321 higher bill for each of its containers.

What's clear is that manufacturers will need to ensure that their supply chain partner is working closely with individual carriers, that they're verifying availability of containers and that they're identifying alternatives.

The verification of containers is likely to be especially important as some carriers start to impose restrictions on the release of empty containers - and to avoid the risk of goods being left stacked up at production facilities or portside.

 

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