How Port Congestion Is Causing a Markup in Shipping Container Prices

Kent Gigger
July 15, 2022
How port congestion is causing a markup in shipping container prices, Fishbowl Blog

Supply chain complications and the ever-evolving pandemic have meant strange times for the container shipping industry, including port congestion and wild price fluctuations. There’s also a massive shipping container shortage playing out. If anyone was hoping that things would eventually return to normal, that’s not looking to be the case. 

Securing $59 billion in profits for the first quarter of 2022 certainly was a promising achievement, as it set new records and was driven almost entirely by competitive pricing. However, it doesn’t change the arduous state that the logistics and shipping industry is currently facing.

Those shipping and container prices will continue, and all-time highs may also occur, but it’s still important to consider the primary factors for these trends. What else is causing a high markup in shipping container prices? Is it port congestion, demand, and freight increases, or is it something else entirely? When is the shortage going to end?

The Rolling Tide: What Happened?

None of this happened overnight. It has been a slow state of progression, which has led to an eventual global container shortage, high demand, and a bevy of related issues — port congestion included.

Most of it can be traced back to the start of the COVID-19 outbreak in 2020. Lockdowns and closed factories meant fewer shipping vessels were on the open ocean importing and exporting goods. This was especially the case in China, the epicenter of the pandemic, at least initially. Fewer containers were going out and coming back.

This was exacerbated in North America by workforce disruptions and other events, which meant empty and unused containers piled up. Tightening borders and challenging customs processes also resulted due to the pandemic.

Things have grown much more complicated since then — especially because of a geopolitical conflict between Russia and Ukraine — and there’s no immediate solution to many of these problems. That’s why the cost of shipping containers has reached all-time highs. In addition, demand isn’t slowing, even in the face of a global recession.

How Did It All Lead to Port Congestion?

The shipping container shortage is not necessarily because of a lack of available containers but has more to do with logistics complications. Nearly all containers are stuck in ports, whether in storage facilities or on vessels. They were locked into various regions because of pandemic shutdowns — which saw fewer shipping vessels at sea and in operation. 

However, a tight labor market — including worker shortages, slower container production, and major financial concerns coming down the pipeline — has made it much worse. There is still an excessive amount of shipping containers sitting unused and unavailable.

Naturally, the entire shipping and logistics industry has taken quite a hit, which extended delays and contributed to port congestion challenges at the current scale. Packaging alternatives can help, such as wood crating for long journeys. But many import and export activities are still being drawn out. 

It’s crucial to remember that many shipping vessels are locked out of ports, just like the containers they carry. Even so, these alternative packaging and shipping solutions can certainly help alleviate some of the stress on shipping lines.

The Inevitable: A Big Markup

New technologies are being deployed to automate various processes and increase supply chain visibility. But many of the existing challenges still remarkably influence field operations. AI and machine learning at least provide an answer to labor complications, but they don’t fix any of the other happenings. They’re designed to improve efficiency and maintain a steady output or scale as necessary to customer demands. They can vastly improve operations that were not using them before, though they won’t solve the related challenges outright.

Port congestion, the shipping container shortage, and a steady demand have all created a significant markup in shipping and container prices that was seemingly inevitable. Getting those unused containers out of ports, storage facilities, and vessels is a serious undertaking even when logistics companies are fully staffed. They’re currently not, and the pandemic is still hanging around amid vaccinations, more shutdowns, and safer handling processes. 

These price increases were always on the horizon. Because of uncertain times ahead, there’s no way to estimate how long they’ll be relevant — or how long they’ll stick around.

No End in Sight to the Shipping Container Shortage

Container production is ramping up, but it won’t be at pre-pandemic levels for some time. Port congestion is also letting up, ever so slowly. And many factors could ignite the situation and make it worse. However, there is hope in modern technology and how logistics operations deploy it to improve handling and shipping processes. For example, manufacturing and warehouse inventory management software can automate and scale operations to meet incoming challenges.

Technology is not an end-all solution, though. And there’s no definitive end in sight for shipping container shortage and price markups. The good news is that the industry will continue to see incredible profits during this time, thanks to competitive pricing and steady demand. These will be even higher if those challenges can be overcome.