Corona has some ugly economic consequences which seem to turn into a permanent state, for the time being. Even worse, some of these consequences show their real true face just now. This clearly refers to the complicated freight situation between Asia and Europe. Historically high prices for containers and shortages plague a lot of industry sectors. Is there an end in sight?
Freight situation since Corona started
The Corona pandemic hit the container shipping business hard. Seemingly out of the blue the demand for containers sank with the speed of light. Often containers stranded somewhere in the world when trade broke down. Of course, the shipping companies reduced their capacities. Nobody seemed to take into account that Corona on the other hand would trigger a fast rising demand for such consumer goods as electronics. People could not spend their money on trips, out of house dinner or cultural events anymore – so a kind of compensation has been sought in consuming. This pushed world economy since last autumn with an unexpected speed and the demand for container shipping. Unprepared for that, container business began to struggle with delays and exorbitantly rising prices. And this development now hits different branches in Europe with all the might. On top the Ever-Given-havoc put even more pressure on the container branch – the consequences become visible even to the consumers now.
No Wood, no other Raw Material – the European Industry groans under the Freight Situation
Raw materials such as wood, metal and goods as electronics become scarce. Shelfs stays empty even at Lidl, Aldi and Co. At the transshipment points in Asia shipment companies fight with a lack of staff, containers and sometimes even trucks. Raw material supplies for pet food like Vitamins, Amino Acids from China, hydrocolloids like Carrageenan from South-East Asia or Cassia from India are affected too. The logistics branch still is influenced by conditions associated with the pandemic such as testing and working in strictly divided shifts. Shipment companies have reacted to the volatilities of their business by forming alliances. Critics blame these alliances and a seemingly greedy mentality of the shipment business. Experts see real difficulties in coping with an unexpected situation. They see a recovered freight situation at the earliest for the second or third quarter of 2021.
Shipping Companies on the Road of Victory?
What is a real desaster to industry in Europe could be a stroke of luck for the shipping companies in the end. Their profits rise. This is not only due to a rising demand for container transportation from Asia to China. Also, some of the rationalization processes associated with the alliances show results. The load factor of each ship might have risen per 10 %. These are good news for the container business. But are these news good for the rest of industry especially in Europe, too? All in all, it is not likely that the freight situation will fully turn back to the ante-Corona situation easily. If the situation turns out to be an economically perfect chance for the container business, these companies in Asia and worldwide have no real stimulus to change things and a difficult freight situation. European industry should be prepared that the delivery conditions between Asia and Europe shall not become ideal for them in a short period of time. Who should go for decreasing prices when higher prices can be pushed into the market? Who would supply more containers when the demand could change again and the market stays volatile out of the very nature this kind of business has? Actually, one could not hold it against the shipping companies when they act with their advantages in mind knowing that world industry depends on them in one way or the other.
Secure your supply chain Asia – Europe
It is no far-fetched thought that prices for containers might stay on a higher price level constantly and that the rhythm of delivery could be slowed for longer.
For now, pet food companies who depend on trade between Asia and Europe should do all to secure their supply lines and pricing conditions for delivery. These are decisive competitive advantages now. Have the right partner by your side and pass this insecure freight situation unscathed, even when it goes on for a while.