One of the industries most severely impacted by the economic downturn of 2020-2021 is shipping. Statistics compiled by the United Nations Conference on Trade and Development show that shipping declined by an astonishing 4.1% over the previous financial year, laying bare the huge problems the industry has faced in the wake of COVID-19. Where international shipping has fallen, other industries have picked up the slack, and a handful of key figures indicate the scale of the ongoing recovery. One of the biggest winners in the shipping industry has been internal private shipping, which is fuelling a rapidly growing internal American market.
Internal and overnight delivery
With people confined to their homes, grocery deliveries and online shopping have surged. With that has come a huge increase in shipping through private couriers and shipping services. Shipping brand LSO.com highlight the increased cost of overnight shipping, as consumers create demand for same-day or next-morning delivery. This has seen a surge in costs that CNBC estimates will continue torise by 5 to 6 percent. This isn’t going to drop, according to analysts. Interest in overnight shipping will continue to arise due to high internal demand – elsewhere in the shipping industry, the impacts of COVID continue to leave residual issues.
Furthermore, while US manufacturing is cooling, Reuters notes a huge growth in the US manufacturing index, which rose to a 47-year high in May. More products being produced at home means more demand for internal shipping, a greater consumer market and, overall, greater strain being placed on US internal delivery markets. Furthermore, developments at coasts not under the strain of pileup indicate the importance of the increasing size of the internal market.
The west coast pile-up
As the gateway to the Pacific, the American west coast sees a huge amount of shipping traffic. According to Logistics Management, five of the ten biggest ports in the USA – Los Angeles, Long Beach, Seattle, Tacoma and Oakland – are all located on the west coast. Since April, many of these ports have been reduced to a sluggish pace of processing due toa pile-up of Asian containers bound for the USA. Nikkei Asia reports that LA and Long Beach, which handles 40% of the total trade volume of the USA, have simply been unable to deal with these volumes due to the number of workers unable to attend. This has created a month-long delay in products reaching the USA, and has rebalanced shipping to the east coast – a factor key in forming the new normal.
The renewed importance of eastern seaboard shipping has recently been given the figurative show-of-force in the arrival of increasingly large cargo ships. The Port of Savannah, GA, recently welcomed the CMA CGM Marco Polo according to a US News report. This vessel, of incredible size, is a strong indicator of the increasing volumes on the east coast. However, with freighter sizes in the Pacific dwarfing even the Marco Polo, it’s important to look at the shift in freight type and sizes when looking at the overall picture of the USA’s shipping industry.
A shift in focus
McKinsey analysis highlights where shipping will move next. Freight is more likely to be delivered by air or by truck. The types of goods being moved are different; less focus is being placed on miscellaneous manufacturing items, with basic commodities and agriculture taking the bulk of manufacturing movement. This is a demand driven by absolute necessity and taken away from the need to manufacture luxuries and supplementary products that previously defined the market. The impact on shipping is a greater focus on in-country freight; fresh goods, with a shelf-life, being moved quickly to address demand from corners of the country that can no longer be served by international shipping.
Indeed, with more manufacturing happening at local level, and a greater focus on fresh food (K-State University research noted that 70% of families were cooking at home since the pandemic started, a massively increased figure), timely and high-speed deliveries across the country have never been more crucial to supporting the economy than they are. Americans are increasingly buying American, and that’s going to have a huge impact on what the shipping industry looks like.
The BLS has recorded a massive surge in air freight prices up to June 2021. Some of this is to be expected with the overall rise in alternative freight, given the issues naval shipping has faced, but there’s also the story of increasing private exports. With an increased internal market, more items bought from abroad will be unique or individually sold. Often, this is subject to air freight as consumers pay more to get their goods faster – after all, many consumers are more than willing to pay for convenience in the modern day, where shipping has gained a lot of revenue.
What does this mean in the long term? A smaller, more focused delivery industry. Much of the work will be conducted via road and rail; removing the importance of naval shipping. For individual deliveries, the sky will reign supreme – fast, short-haul deliveries of luxury commercial products, whether from across the ocean or within the USA. Air freight is of course more carbon intensive and more expensive, but as long as US consumers are willing to pay the premium for their goods, the relevance of the freight form will be high and will continue to provide service to those consumers with the money to spend.
This will define shipping in the future. Local, quick deliveries, from local sources and with nationally based couriers. International shipping of course remains relevant, but with the lower rate of processing that the average port is able to conduct, it won’t be quite as relevant as in the past. The east coast will rise to further prominence as congestion from Europe and Africa pales in comparison to what is being experienced from the Pacific; only time will tell whether this is a permanent trend.