Containerized shipments of agricultural commodities to Asia are “grinding to a halt,” according to a transloader.
“In 20 years I’ve never seen anything like this,” said a freight forwarder in the pulse industry who requested anonymity due to commercial concerns.
German shipping company Hapag-Lloyd announced last week that it was temporarily suspending overseas ag container shipments from North America.
Other container lines have not formally announced anything but they are following suit and curtailing shipments as well, said the transloader.
COVID-19 initially caused a dearth of containers in North America because China closed its ports and stopped shipping consumer goods overseas.
Now the opposite problem is occurring. China is making up for lost sales caused by the pandemic and a prolonged trade war with the United States by flooding the market with containerized goods.
There is a growing urgency to send empty containers back to China as soon as they are unloaded rather than waiting to fill them with agricultural goods for the backhaul.
A steamship line makes about $5,000 hauling a container from China to Vancouver. On the return trip they might earn $1,000.
It is not worth the potential extra 30 days of dwell time to make that $1,000, especially when there are customers on waiting lists in China who are willing to pay an extra $500 to $1,000 per container.
The transloader has “heard rumblings” that the situation won’t be resolved until after the Christmas holidays. He has been telling his customers to temper their expectations on pulse crop movement.
“This is just going to stretch demand further and I would imagine as it stretches demand further prices are going to start to become more volatile too,” he said.
The transloader said many people in the containerized pulse trade will be “suffering severely” from what is transpiring.
“The ripple effects of this will last for months,” he said.
Greg Northey, vice-president of corporate affairs with Pulse Canada, said 30 percent of Canada’s pulses and special crops move to market in containers.
Peas tend to move in bulk, especially shipments destined for China. Lentils are far more likely to move by container.
“Lentils would be the most impacted by this,” he said.
Northey said there is usually some post-harvest tightness in container supply but it is unusual for a company to announce it is suspending all overseas shipments of ag containers.
Hapag-Lloyd is part of an alliance that controls about 30 percent of the container traffic between Asia and North America.
He has heard the company is suspending shipments for four to six weeks until the supply of containers is more balanced in China.
Northey said container logistics is a complex process. Any wrench in the system can cause serious disruptions, so this is not good news for the entire supply chain.
“Disruptions create all kinds of execution risk for the trade and ultimately for farmers,” he said.
The transloader said there is still some container movement happening to markets like the European Union and Latin America. The main disruption is to container traffic to Asia through the Port of Vancouver.
The biggest problem is that the railways are unable to get the containers back to the Port of Vancouver in a timely fashion because there are only so many locomotives, rail cars and rail lines.
He said the railways and the entire shipping industry were blindsided by the overwhelming demand from the steamship lines to return containers to China.
It doesn’t help that the railways just recently started getting employees back from COVID-19 layoffs and catching up on delays caused by a month-long series of strikes at the Port of Montreal.
The transloader said shippers are going to have to find creative ways to get product to market, perhaps by sending more cargo through the Port of Montreal.
But bulk exports are starting to back up in that port, which may have a spillover impact on containerized movement, he said.
The restricted availability of containers is an issue for commodity groups in the United States as well.
The Specialty Soya and Grains Alliance (SSGA) issued a news release expressing its displeasure with Hapag-Lloyd’s announcement.
Exporters in the Minneapolis-St. Paul area have relied on the shipping company for years to offset a chronic shortfall of containers in the region.
“Hapag-Lloyd has been one of the most reliable and dependable carriers for rural, inland ag shippers, so this announcement is devastating and shocking,” said Bob Sinner, president of the SSGA’s competitive shipping action team.
Hapag-Lloyd delivered more than 17,000 20-foot containers filled with U.S. food-quality soybeans to customers around the world between Oct. 22, 2019, and Sept. 25, 2020, according to the alliance.
“For those of us in the food soybean arena, we are just coming off a harvest that our overseas food manufacturing customers are anxious and desperate to begin receiving,” said Sinner.