Maritime transport: rising costs and delays impact SMEs

The Covid-19 pandemic has disrupted the shipping industry, with congested ports, container shortages and major disruptions to the supply chain. Goods delivery times have lengthened considerably, and costs have risen, confronting many SMEs with major difficulties.

Various explanations for the disruption of maritime transport

While all the major shipping companies and market players agree that the Covid-19 pandemic is the main culprit, there is no unanimity on the precise causes of the disruption to shipping.

The shipping companies cite, first and foremost, thesudden surge in consumer spending during the first confinements introduced around the world. With many services closed, households turned to buying goods on e-commerce platforms, particularly in the USA.

This sudden increase in cargo volume was compounded by other difficulties directly linked to the SARS-Cov-2 virus. In China, for example, a "zero Covid" policy has meant that entire terminals have had to be closed in response to a single positive case detected among employees, resulting in port congestion.

But for market players, the disorganization of maritime transport is not just linked to the health crisis. Like the Federation of European Private Port and Terminal Companies (Feport), some are pointing the finger at the very workings of the maritime logistics chain, denouncing the alliances formed between the major companies, and putting the famous congestion of ports into perspective, since the average length of calls has, in their view, increased only slightly at the height of the crisis.

SMEs seek sustainable solutions

Whatever the precise causes, the disruption to sea transport is creating major difficulties for importers and exporters, withconsiderably longer lead times and soaring costs. SMEs that depend on import-export are particularly hard hit by these disruptions, and are trying to find lasting solutions.

According to the trade organization Union TLF (Union des Entreprises Transport et Logistique de France), costs are between 6 and 10 times their pre-pandemic level, and this increase has been accompanied by a deterioration in service quality.

SMEs try tooptimize containers as much as possible, by importing larger volumes, even if it means joining forces with other companies when their sales capacities are not sufficient to order larger quantities.

Some companies are turning, at least in part, to other means of transport, notably rail. But here too, the supply chain is disrupted, and delays can be longer than expected.

We are also witnessing the relocation of some SME production to Europe, even if it is still difficult to compete with the speed of Asia, and China in particular.

Despite these changes, most SMEs are forced to cut their margins in order to cope with rising transport costs without driving up sales prices. Consumers are nonetheless seeing prices rise, the disorganization of shipping being partly responsible for the increase in inflation.

The more time passes, the more pessimistic companies become about a rapid return to normality. For many, pre-crisis low shipping prices are a distant memory.

Nevertheless, there are signs of improvement: the major shipping lines are currently investing in new vessels, and the world's No. 3 container carrier, France's CMA CGM, decided last September to freeze some of its tariffs.

Various players in the logistics sector have also decided to lobby the European Commission to change the situation.

Indeed, while Brussels usually keeps a close eye on competition issues, shipping continues to be exempt from European competition rules. While the Commission still seems to be betting on a natural market correction, the situation is becoming increasingly complex for SMEs and VSEs on the Old Continent.