Why a shortage of shipping containers is threatening Ireland’s economic recovery 

China was already the largest trading nation on the globe when the pandemic struck, with almost twice the trade volume of the US. China’s exports rose again in 2020 despite pressure from the coronavirus and the tariff war with the US, increasing by 3.6% to €2.2 trillion, the highest ever. The growth was strong in the second half after China became the first major economy to revive following the pandemic.

The latest lockdown dramatically reducing output in many European manufacturing companies and the scale of the demand for Chinese goods has left a huge imbalance in the availability of shipping containers. Chinese shipping lines are soaking up large chunks of the global stock of containers, leaving European shipping lines with shortages not seen for decades. The net result is that shipping cost have risen by up to 350 per cent. 

The cost of getting a 40-foot container from ports in Asia to northern European has increased from about €1,700 in November to more than €7,500 now.

Brexit congestion at European ports has also added to the problem as the containers can’t be returned to Asia quickly enough – so there aren’t enough shipping containers where they need to be resulting in wild price increase as companies fight for the few containers in circulation.

The squeeze on shipping space and the resultant record ocean freight rates on the Asia-Europe trade lane are showing no sign of abating and could have a significant impact on Irish industry which relies on China for much of the engineering and electrical components to run factories and complete products for export.

A recent survey by IHS Markit found that, in December, eurozone manufacturing suppliers’ delivery times reached the worst levels since the height of pandemic-related lockdowns last April.

Many Irish exporters faced with both Brexit and Covid disruption to their sea-freight operations are checking out their options to air-freight their goods to markets outside Europe. Air cargo is surviving the crisis in better shape than the passenger side of the business. For many airlines, 2020 saw air cargo become a vital source of revenues.

Meanwhile, cross-border e-commerce volumes have accelerated, spurred by lockdown measures and will continue to drive air cargo rates in the year ahead. Retail and fashion are the leading verticals, as they recorded a 44% and 27% year-on-year revenue growth respectively on global markets in 2020. Again, the high proportion of e-commerce goods being made in China and shipping into major European and US hubs is creating pressure for space.

Looking ahead there are two big transport issues facing Irish companies, the impact of both Covid and Brexit on the cost of getting goods to market.

As countries begin to prepare for massive vaccination programmes the priority for many airlines struggling to survive, is to capitalise on the opportunity to carry the vaccines and as a result, the race for space on both routine scheduled and chartered flights continue to heat up. Competition for space, in turn, brings further spiralling prices.

Agri-food exporters are particularly at risk of being caught up in cross-border delays, delays which can have a devastating impact on time-sensitive produce. UK supermarkets and independents demand quality fresh produce, with a good shelf life, regardless of Brexit. 

Goods which have been kept in transit when they should have been on the shelves will have a reduced shelf life triggering substantial losses to the Irish producer.

John Whelan is a leading consultant on trade and business. He is also managing partner at the Linkage–Partnership, which is an international trade consultancy.