As far as book keeping goes, companies keep track of inventories in one of two ways; it’s either first-in, first-out or last-in, first out. But if you’re getting or sending anything through domestic ports, your containers are likely moving slow-in, and slow-out. The pileup began soon after the Pak-Afghan border was closed on 2 March. Almost concurrently, Islamabad began imposing restrictions in the domestic economy. By April, many importers were letting their cargo sit at the ports because finding a truck to move it, was a huge challenge. The government was facilitating this behaviour by extending the time limit for filing goods declarations to 25 days from the usual 10 days. Port authorities also exhibited largesse; importers were given free storage for two weeks, easing the incidence of demurrage charges.
Over the next few months, imports slowed, but everyday there were still thousands of containers arriving in the country. Then came the rains, and the ensuing deluge in Karachi. The Prime Minister’s Advisor on Commerce, Abdul Razzaq Dawood took to Twitter to officially concede that exports would take a hit that month because the road network was submerged.
By mid-September, there were more than 11,000 containers stranded at Karachi ports and customs stations, from the Afghan transit trade alone. Reportedly, customs officials are clearing as many as 800 of these containers per day to alleviate the congestion. Yet the pile up continues, worsened by the abnormal impact of COVID-19 on marine traffic, and global commerce.
Lockdowns and other social restrictions have forced businesses to halt operations, leading to delays or even cancellation of orders. Without wares to ship off to buyers, many companies have had to cancel bookings with freight forwarders. Without enough containers to make their trips worth it, a number of container shipping lines began to cancel planned voyages. Blank sailings by major shipping lines hit a peak in the first quarter. Since then, 11 of the top dozen companies have cut down their overall fleet capacity. Effectively, there are fewer ships to take containers around the world.
Industry reports show 11 of the top 12 carriers reduced their overall fleet capacity, this year, allowing them to earn higher margins despite a slowdown in global commerce. Freight rate aggregator, JOC reports a rise of at least 25 percent in spot rates for container shipping compared to last year, for major routes like China-US West Coast, China-South America and China-Europe. Data obtained from shippers in Pakistan shows the price hikes are even steeper here. Shipping a 40-foot container from Karachi to Chicago today could set you back $4,000 which is much higher than the ball park $2,400 rate that usually applies to the route.
But even paying such a high premium is not guaranteeing a swift pickup from the port. With their fleets downsized, international shipping companies are now jostling to keep up with a pickup in global commerce, led largely by China’s roaring comeback. As a large chunk of their business is driven by the Mainland, the marine logistics providers are prioritizing their claims for containers. Pakistani exporters are also competing for limited space with Indian and Bangladeshi ports, on feeder vessels which connect to ports like Salala and Colombo.
To be fair, these are unprecedented conditions brought about by the global pandemic. As and when outbreaks of the virus are contained and minimised, global commerce can be expected to normalise as well. But the competition for space on container vessels will only get tougher. The government is reportedly hatching a fresh five-year plan to boost exports. It would do well to include a strategy for ensuring that businesses are able to transport their products to destination markets, cheaply and quickly.
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