Shipping container crisis deepens

The shipping container shortage is particularly problematic for the pulse and special crops industry, which comprises many small exporters supplying niche products to buyers who don’t want to purchase bulk commodities. | File photo

Transport Canada’s response to the long-running shipping container crisis falls far short of Pulse Canada’s expectations.

The government says it recognizes the challenges in accessing containers and outbound vessel slots for Canadian exporters.

“This is a global market condition phenomenon affecting worldwide container traffic,” Transport Canada spokesperson Sau Sau Liu said in an email.

“We are closely watching international developments and will be considering their implications for the Canadian context.”

Greg Northey, vice-president of corporate affairs with Pulse Canada, said that is an unsatisfactory response from Ottawa.

“Industry has been clear that it is not enough for Canada to sit back and monitor how our international competitors are working to resolve this issue,” he said.

“The federal government has tools at its disposal, but its current inaction is jeopardizing the competitiveness of Canadian pulse and special crops shippers and the broader Canadian economy.”

Pulse Canada wants the Canadian government to follow the lead of the United States, where a presidential order has authorized the Federal Maritime Commission and Surface Transportation Board to investigate the practices of steamship lines regarding consolidation and pricing.

Stephen Paul, vice-president of supply chain management with Ray-Mont Logistics, said that is at least a shot across the bow for shipping lines.

“It definitely puts them on notice that they’re being watched and they’re going to be under scrutiny,” he said during a recent webinar organized by the Canadian Special Crops Association.

The container crisis began in earnest in September 2020. One year later the situation has only got worse.

The fundamental problem is the COVID-related surge in demand for consumer goods out of China.

There is such a pull out of China to refill containers that shipping lines are sending them back empty rather than waiting for them to be stuffed with backhaul products like crops.

Shippers are making four to five times the regular amount for hauling containers filled with consumer goods out of China, so there is a sizable financial incentive to get them back there as soon as possible.

Hapag-Lloyd and the Shipping Federation of Canada were contacted for this story but did not respond.

Steven Pocklington, president of CFT Corp., an international logistics company, estimates that 60 percent of 20-foot containers and 80 percent of 40-foot containers are heading back to Asia empty.

That is resulting in a container shortage and escalating costs. Paul estimates there will be half of the normal container supply available for transloaders like Ray-Mont in the September-October period, when new crop is supposed to be moving to overseas markets.

“We’ve already begun the process of laying off half (our) staff,” he said.

Northey said shipping lines are cancelling traditional container routes to focus on getting empty containers back to China.

“It seems almost weekly we’re losing shipping routes right now,” he said.

Paul said Hapag-Lloyd is withdrawing its South American service, and Mediterranean Shipping Company has “drastically reduced” service to South America and the Indian subcontinent.

Those are just two examples of the multitude of cancelled routes out of the West Coast.

There should still be decent access to China and Southeast Asia out of Vancouver but it will be hard servicing markets in South America, the Indian subcontinent and the Mediterranean Basin.

The situation is much better in Montreal because there isn’t the same pull for containers out of that port.

Transloaders like Ray-Mont are scrambling to bring additional container capacity to Montreal where there are some empty containers available to be filled.

There is also an ongoing shift out of containers and into bulk shipping where possible.

Northey said those fortunate enough to get their outgoing product into a container are getting rolled over to the next vessel because priority is being given to empty containers.

That can result in a 60- to 80-day delay waiting for the next ship. Detention and demurrage costs are eating up any profit associated with the shipment.

Northey said the container shortage issue is particularly problematic for the pulse and special crops industry, which is comprised of many small exporters supplying niche products to buyers who don’t want to buy bulk commodities.

About 30 percent of Canada’s peas, more than 50 percent of its lentils and the vast majority of its special crops travel by container to markets around the world.

“It has hit us really hard,” he said.

“There’s a lot of concern in the sector.”

Jordan Atkins, vice-president of WTC Group, a transloading company, said there is no end in sight to the container crisis.

“We’re seeing the demand that is causing these imbalances continue for at least the next six to eight months,” he told delegates attending the CSCA webinar.

Atkins said there has been a dramatic decrease in inland source-loading of containers because shippers are being charged an extra US$5,000 to $6,000 to have containers filled in Alberta or Saskatchewan rather than at the ports.

Pulse and special crop shippers are considering launching a Competition Bureau complaint into the actions of shipping lines but would far prefer a Transport Canada investigation.

The concern is that the ocean carriers are making big money on this new business model and may continue to snub backhaul exports for the foreseeable future.

Paul said the carriers are making up for decades of losses and are unlikely to change their practices unless governments order them to do so.

Even if that happens, he wonders what impact it will have.

The government can order them to devote a certain amount of space to backhaul containers but it can’t regulate what price they charge for that space, so it may all be a moot point, he said.

Exporters cannot afford to pay the $10,000 to $14,000 per container that importers are paying, said Paul.

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