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SEA-INTEL: US$5B-US$10B LOST TO SHIPPERS DUE TO DELAYS
June 8, 2022
Shipping delays due to persisting supply chain constraints are costing shippers worldwide anywhere from US$5 billion to US$10 billion, according to a recent analysis by Sea-Intelligence.
The maritime analyst said to start off, it calculated what share of global trade was being moved on the deep-sea trades that are covered in our Global Liner Performance report.
"Having an inventory equals additional supply chain costs," Sea-Intel said, noting that the cost of inventory depends on the value of the cargo in the container, as well as the interest rate a company assigns to their inventory value (their Internal Rate of Return, IRR).
It then computed the share of cargo that was being shipped late.
Sea-Intelligence said before the pandemic, the baseline level was roughly 20%, increasing to 70% of the cargo arriving late in the past few months.
"We then calculated the number of TEU Days lost due to late arrivals. The pre-pandemic baseline was an average of 8 million TEU Days lost to delays each month. In January 2022, this increased to almost 70 million TEU*Days, before dropping in March 2022 to 57 million TEU Days," the report said.
"To place this measure into context, it can be argued that the loss of 31 TEU days in January is the same as having an "inventory" of 1 TEU of cargo just standing idle for the full month," it added.
Using this definition of "inventory", the analyst noted that the pre-pandemic normal is a permanent inventory of 260,000 TEU globally, due to cargo delays.
This spiked, due to the current supply chain delays, to a present level of 1.8 million TEU of "inventory."
"Having an inventory equals additional supply chain costs," Sea-Intel said, noting that the cost of inventory depends on the value of the cargo in the container, as well as the interest rate a company assigns to their inventory value (their Internal Rate of Return, IRR).
Although there is a very widespread value of the cargo, the analysis said a reasonable global standard benchmark is 40,000 USD per TEU.
Alan Murphy, CEO, Sea-Intelligence said in order to assess the total impact over the baseline loss (as some cargo always gets delayed), Sea-Intel has calculated the cumulative loss from January 2020 to March 2022, over the 2019 baseline level.
"What this tells us, is that the severe vessel delays alone have resulted in a financial loss for the shippers globally, of roughly US$5 billion -US$10 billion thus far," Murphy said.
"This is only the ocean side and does not include any inland delays or port congestion," he added.
