Singapore Port
Outside the port of Singapore. (Image: @shawnanggg via Unsplash)  

Global maritime supply chains in times of COVID-19

The pandemic took the maritime transport industry by surprise and is now accentuating some of its long-term challenges. 

By Jan Hoffmann

It was projected last year that seaborne trade, including containerized trade, would experience a strong downturn as a result of the COVID-19 pandemic. However, changes in consumption and shopping patterns triggered by the crisis, including a surge in electronic commerce and economic stimulus packages, led to increased import demand for manufactured consumer goods, a large share of which is moved in shipping containers.1

The rise in demand was stronger than expected, and could not be met with a sufficient supply of shipping capacity. Empty containers to move exports from China to destinations abroad became unavailable. Empty boxes had been left in places where they were not needed, and repositioning had not been planned for. Moreover, as carriers introduced blank sailings, that is, skipped port calls, the mismatch between supply and demand for empty containers was exacerbated, as empty containers were left behind and failed to be repositioned. Since late 2020, container ships have begun to anchor off the west coast of North America, waiting for berths to free up. Containers have been stuck on ships, intensifying the shortage in capacity. After the containers are finally delivered and emptied, the return to China has been hampered by a slowdown in intermodal connections resulting from COVID-related difficulties.

These developments culminated in freight rates reaching historical highs by late 2020 and early 2021 (figure below). This surge spread across some developing regions, including Africa and Latin America, where it outpaced the hike observed on the main East–West routes.

Shanghai containerized freight index

Note: Weekly spot rates (18 December 2009 – 11 June 2021). 

Source: UNCTAD calculations based on data from Clarksons Research, Shipping Intelligence Network Time Series.

The challenge for destinations in many developing regions

Why did the freight rates increase particularly to South America and Western Africa? Longer routes require more ships for a weekly service, which implies that a large number of containers are also stuck on these ships. Therefore, when empty containers are scarce, an importer in Brazil or Nigeria has to not only pay for the full import container’s transport, but also for the container’s inventory holding cost, including during the return journey. Additionally, there is a lack of return cargo (both South America and West Africa are net importers), making it quite costly for carriers to return empty boxes to China on long routes.

Freight rates on thinner routes, that is, with only two or three weekly services, tend to be more volatile, since taking out or adding one vessel call or one service has a significant impact on the overall limited number of prevailing services compared with routes that have a higher density and more frequent services.

Competition authorities in Europe and North America have closely monitored freight rates and capacity management by carriers and their alliances, possibly limiting the potential of further increases in freight rates. In developing countries, such monitoring and subsequent consultations with carriers may be more difficult to conduct, as national competition authorities often have limited resources and expertise in the specialized field of international container shipping.

Back to the future

The pandemic took carriers, ports and shippers all by surprise, and the subsequent shortage of empty containers observed since late 2020 is unprecedented. No contingency plans were in place to pre-empt the lack of availability or to mitigate its negative impacts. Given current trends, several months will likely pass before this disruption can be absorbed across the maritime supply chain and before the system resumes smoother operations. In the meantime, there are three main long-term challenges of which the Ever Given incident was a stark reminder.


The pandemic has highlighted the importance of resilient supply chains. Customs officials, port workers and transport operators have recognized the need to reduce physical contact, while at the same time keeping ships moving, ports open and cross-border trade flowing. Some of the trade facilitation solutions proposed by the United Nations Conference on Trade and Development (UNCTAD) contribute to achieving the objective of facilitating trade and transport while at the same time protecting the population from the virus. Many of the measures depend on the digitalization of trade procedures, including in maritime transport. Policymakers need to proactively engage in implementing ambitious trade and transport facilitation reforms to reduce the impact of disruptions in the future. They also need to promote transparency and encourage collaboration along the maritime supply chain, while ensuring that potential market power abuse is kept in check or prevented.

Consolidation in container shipping

Carriers have earned high rates of return during the pandemic, with double-digit operating profits for some container carriers in 2020. Shippers have emphasized that they do not have access to empty containers for exports and face blank sailings, as well as high freight rates, and competition authorities are investigating potentially abusive behaviours. While there are several reasons that might explain the shortage in containers and ship supply capacity—including the pandemic’s disruptive nature and associated restrictions—it is also important to ensure that national competition authorities can monitor freight rates and market behaviour. UNCTAD is contributing to such monitoring through its research and statistics on fleet deployment, port calls, freight rates and liner shipping connectivity. Policymakers must continue to strengthen their national competition authorities in the area of maritime transport, and ensure that they are prepared to provide the necessary regulatory oversight.

The energy transition

The main long-term challenge for maritime transport is decarbonization. To assume its responsibility in the fight against climate change, the maritime industry will need to go through an energy transition which is as fundamental as the change from wind to coal, or from coal to oil as the primary fuel source. The energy transition will also be a key factor in industrial development and the participation of developing countries on global value chains in coming years and decades. Shipping—and increasingly zero carbon shipping—will be needed to fuel this transition.

  • Jan Hoffmann is Head of the Trade Logistics Branch, Division on Technology and Logistics at the United Nations Conference on Trade and Development

Disclaimer: The views expressed in this article are those of the authors based on their experience and on prior research and do not necessarily reflect the views of UNIDO (read more).

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