North America Container Logistics Update June 2022: Port congestion increases the pressure on supply chains in the run up to shipping’s peak season

With the congestion at ports showing no signs of abating and prices for many goods still rising, global supply chains remain under pressure. The continuing conflict with Russia/Ukraine, recent lockdowns in China, delays and protracted supply chain shortages continue to cloud the trade outlook in North America.

Saranya Senguttuvan, 20 Juni 2022

This latest update brings you insights that directly concern your business. Here at Twill, we aim to equip you with information on the global supply chain status to help you navigate the challenges in your day-to-day business. We have compiled our latest update on the North American market.

What's impacting North American supply chains?

  • End of Shanghai covid lockdown to gradually ease supply chain congestion: The Shanghai lockdown lifted on June 1, and operations are slowly returning to normal. All depots and warehouse operations in Shanghai have resumed, though drivers still need to show negative Covid-19 test results and health and travel documents. The trucking services capacity to and from Shanghai has improved to about 80%.

  • Maersk has concluded vessel operations in Russia while identifying new options for Ukraine: With the safety of our people at the forefront of our minds, we have done our best to withdraw from Russia responsibly. We completed our last cargo operation in a Russian port on May 2. We have also identified merchant and carrier haulage options to and from Ukraine via Poland or Romania. Read more in our dedicated Ukraine/Russia FAQ.

  • ILWU/PMA negotiations likely to extend beyond June: The ILWU and the Pacific Maritime Association issued a rare joint statement that they are committed to negotiating a new contract without disruption as they expect talks to extend beyond July 1 expiration of the existing deal. The Wall Street Journal reported that PMA Chief Executive Jim McKenna indicated that automation would be "front and centre" in the talks. See our April update to review your supply chains and adjust plans to ensure the continuity of your business.

  • Pain at the pump – diesel shortfall and record prices impacting trucking operations: Diesel prices have climbed more than 90% in the past 16 months, with the U.S. national average at an all-time high of $5.71 a gallon in June. Inventories have fallen to a 17-year low because of lower refining activity, reduced availability of Russian fuel imports resulting from sanctions, and higher demand as economies have rebounded with declines in Covid outbreaks. East Coast inventories have dropped to their lowest level since at least 1990. The higher costs are straining trucking company operations while throwing off the budgets of those needing to ship goods. As a result, logistics managers have begun to re-evaluate their strategies to determine the most efficient means and modes of transport.

Ocean Freight Updates in North America

Loaded cargo is up 22% for overall Asia Pacific imports in recent weeks, suggesting that demand is picking up in the near term. This is partly due to the return of normal operations in Shanghai after lifting months of Covid-19 restrictions on June 1. Notably, after new cases of Covid-19 were detected in Shanghai in June, government officials re-locked down the city for a weekend to carry out mass testing. Given the evolving nature of the pandemic, supply chain dynamics remain fluid, and the situation on the ground can change quickly.

Vessel wait times continued to be high across NAM impacted by labour, schedules, and dwelling volumes.

We have seen a slow but consistent improvement in schedule reliability since the beginning of the year. However, vessel wait times remain a factor, particularly in Vancouver, Los Angeles, Long Beach, Newark, and Savannah.

Customer activity suggests that demand will increase in the third quarter of the year due to the upcoming peak season and the rise of Chinese production levels post lockdown. While container demand and congestion levels remain elevated, so do inventory levels, as indicated by many large retailers. This will take time to return to normal. If economists' consensus of slowing consumer demand holds, this should aid in the recovery and decongestion of the supply chain as goods are processed through the terminals.

The best way customers can help terminal fluidity is by picking up containers from the ports and at inland locations as soon as they arrive. Understandably, full warehouses and limited trucking and equipment availability make this a challenge across the supply chain network.

West Coast Highlights:

Port congestion in Los Angeles and Long Beach remains challenging, with waiting times at these ports reaching 5-15 days for Los Angeles and 18 days for Long Beach. Additionally, imports were sitting at the port for an average of more than six days in April, compared with approximately 3.5 days a year ago. Rail dwell times at Los Angeles–Long Beach has risen from about three days in December 2021 to over nine days in April.

Yard utilization for the ports at Prince Rupert and Vancouver remains above 100%, and the latest wait time for Vancouver is sitting at 35 days. This has had a significant impact on consistent vessel sailings. Some shipping carriers need to reduce the number of routine stops at these ports for the foreseeable future to ease congestion.

East Coast Highlights:

Import containers sitting at terminals remain a prominent issue. The challenge is that containers normally sent to the West Coast were sent to East Coast ports to avoid the congestion of the west. Congestion is spreading eastward as a result. The Georgia Ports Authority said nearly 28K import containers were sitting on the Garden City Terminal as of May 23, which is more than twice the average from May 2020. At Charleston, there were 24K import containers on the terminal grounds as of May 23, versus 15K at the end of last October.

Inland Transportation News: New "Store-Door" trucking capacity now available

The trucking capacity needed to get containerized cargo from the terminals in the ports to a customer's premises remains available, though constrained in many markets. This first leg of the journey is known as the "Store-Door" delivery service. There have been significant limitations on these services lately due to driver shortages and the availability of the wheeled truck "chassis" trailers upon which the containers ride during their transportation on road networks. The good news is that Store Door availability has opened up for long-term volume opportunities. Contact our Twillers for more information.

What's the market outlook for global container demand in 2022?

Looking further into 2022, Maersk found in its Interim Report for Q1 that supplier delivery times remain lengthy. There is also little visibility into when capacity constraints will decrease, including landside bottlenecks in trucking and warehousing.

For perspective, North American container imports from the Far East rose only 0.5% in the first quarter of the year, while global container demand declined by 1.2% compared to +8% in 2021. Given the negative impact on trade flows and consumer confidence that Russia's invasion of Ukraine is having in Europe, Maersk revised its outlook for the growth of global container demand to be between -1% and +1% for 2022.

The key to the outlook for trade is how consumers and businesses react to the elevated uncertainty, higher prices, tighter financial conditions, and in the case of China, the fallout of its zero-Covid-19 policy. The company's guidance is based on an assumption of the "normalization" of ocean trade activity taking place in the second half of 2022 compared to the significant surge in global shipping demand we have been seeing since the advent of the pandemic. All guidance is still subject to high uncertainties related to the current congestion, network disruptions and demand patterns.

Want to learn more about container logistics?

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