A global maritime transport crisis has been brewing quietly for months. Soon that will lead to layoffs, higher prices and fewer options in the grocery store. Ultimately, this could threaten the security of our country.
Vice President Kamala Harris got a glimpse of the ongoing problem during her recent visit to Asia. In Singapore, a global maritime trade hub, she learned that congestion at its docks was pushing shipping companies to bypass the port.
What the vice president has seen in Singapore and other ports in Vietnam and China critical to global supply chains is a product of COVID. The Chinese port of Ningbo, the third largest in the world, was closed for two weeks in August by authorities for a single case of COVID.
In Singapore, Harris said shipping delays could make it difficult for Christmas shoppers to get gifts on time. But the challenges are greater than that. Our national security apparatus maintains lean stocks and relies on just-in-time manufacturing and delivery, often from overseas suppliers, to replenish their stocks. Shipping delays can create serious vulnerabilities.
>>> Understand and protect vital US defense supply chains
The slowdown is already hitting the house. At Los Angles, a key port for US trade with Asia, historic shipping backlogs have resulted in a horizon full of ships at anchor waiting to enter port. The backlog is even impacting rail service in the Midwest and causing delays in air freight at major air hubs. For the trade in perishable goods such as fruit, delays are a killing; As winter approaches, consumers will find less fruit in grocers.
The causes of these blockages are complex.
The COVID pandemic has hit global shipping and manufacturers with labor shortages for 20 months now. This problem worsened when a large container ship ran aground in the Suez Canal, blocking the waterway for six days. The cascading effects of these misadventures have created delays that will take months or more to resolve.
These delays are compounding the backlog by causing a shortage of shipping containers as ships wait at anchor to unload and reload. Container ships carry 13% of world trade by volume, or 11% of the value of world trade. Shippers want cargoes in standard containers, prompting producers to seek replacements as too many containers are held up at sea, leading to increased demand for sea containers. However, container production is mostly located in China, and supply is unlikely to meet demand anytime soon.
Another problem is the rising costs of shipping containers. On the Asia-West Coast of the United States, they went from $ 1,485 per 40-foot equivalent unit in 2017 to rates ranging from $ 18,000 to $ 25,000 per FIRE. With options limited by the shortage of containers, exporters-importers are exceeding a barrel. Some shippers break contract charges even after cargo has been loaded, which not only adds costs, but new uncertainty to global trade.
The global shipping backlog, combined with a COVID-linked truck driver shortage, is already disrupting U.S. assembly lines. Inventory-to-sales ratios are at an all-time low. Normally, supply and demand would cause more shipping companies and truck drivers to enter the market, but this did not happen for several reasons, including a delayed re-entry into the shipping market. work taking into account generous unemployment benefits.
The main challenge of this silent crisis is inflation, due in part to the increase in shipping, manpower and the limited availability of resources and parts. However, the most insidious impact could be in the area of âânational security.
As Maiya Clark of the Heritage Foundation points out, U.S. defense supply chains rely on a global network of manufacturers, access to which is complicated by the shipping crisis. For years, manufacturers have relied on reduced inventory or just-in-time manufacturing, leaving little surge capacity to increase production or to mitigate disruptions such as a grounded Suez Canal.
Consider how a shortage of microchips slowed down auto manufacturing in the United States at the start of the pandemic. Now consider the impact that supply disruptions could have on the next Colombia– nuclear submarine class ballistic missile launcher. Delays in supply among one of the submarine’s 5,000 suppliers could jeopardize the delivery, which must take place before 2028 to ensure the country’s strategic deterrence.
>>> What the pandemic can teach us about vulnerabilities in our defense supply chain
No reports of production delays have yet been made. But no one inside or outside the Pentagon fully understands how heavily the Navy’s suppliers depend on foreign sources – a truly troubling knowledge gap.
The events of the past six months offer important lessons for the military. First, it needs to have a more complete understanding of its supply chains and actively diversify its production as needed. Second, today’s limited port infrastructure and transport workforce create bottlenecks that could hamper logistics in times of war and crisis. Third, given the recent supply disruptions, the military must assure Congress that “low inventory” and “just-in-time” manufacturing will not jeopardize the success of a future war.
While no one would expect store shelves to run out during Christmas shopping season, Americans’ biggest concern should be rising fuel bills, lack of fruit in the winter, and the issue of whether our military can protect us while they wait for parts.