Ports congestion and container chaos continues, but for how long?

The port gridlock and container bedlam that have been plaguing global supply chains could linger into 2023. The issues at the centre of the snarl include:

  • Vessel prices are still at or near all-time highs;
  • Vessel charter rates are still at or near all-time highs;
  • Rates are still at all-time highs;
  • Sea logistics network congestion are still a significant global issue;
  • Sea logistics network congestion are still burdened with vessel delays, chassis shortages, trucking issues and labour shortages.

So, what is at the centre of these disruptions? According to a recent Kuehne + Nagel (Schindellegi, Switzerland-based global transport and logistics company) sea logistics webinar, roughly 80% of the disruption is associated with inefficiency at North American ports, noting that the ports of Los Angeles and Long Beach (both in California) are responsible for most of the delays. Evidencing this, there were 101 ships waiting for LA/LB berths as of 1 February 2022 versus 40 on 1 February 2021.

The ports of Los Angeles and Long Beach face continued congestions due to vessel backlogs and labour shortages but the Journal of Commerce (1 February 22) reported that both ports have agreed to the White House request encouraging night truck moves (which take place at many other global ports).

Bill Rooney, vice president, strategic development, Kuehne + Nagel, during the webinar, noted that in terms of port congestion, as of 3 February 22 (based on data from Marine Traffic, PMSA, Marine Exchange), Los Angeles/Long Beach is the most congested (93), followed by:

  • Charleston (South Carolina): 18
  • New York/New Jersey: 10
  • Oakland (Calif.): 9
  • Seattle/Tacoma (Washington)/Vancouver (Canada): 9
  • Antwerp (Belgium)/Rotterdam (Netherlands): 5
  • BHV/Hamburg (Germany): 4
  • Savannah (Georgia): 0

Furthermore, the growing demand for domestic containers leaves shortage of 53-foot chassis. Rooney noted that carriers responded to early Covid-19 lack of demand with massive vessel lay ups. As economics re-started, carriers cautiously re-instated capacity.

In many regions, consumption spiked due to more disposable income available to consumers: less spending on ‘extras’ such as vacation travel, but higher spending on consumer durables.

This, according to Rooney, boosted container shipping and rates. However, the spike led to equipment imbalance and shortages which caused rate increases.

The Kuehne + Nagel webinar highlighted other logistics issues such as freight rates, which have risen and increased to levels never seen before in all key Asia export trade lanes. Carriers have implemented so-called premium products to provide priorities – but not guarantee – for equipment and space. Unfortunately, the premium rates are not delivering any premium reliability, “quite the contrary,” per K+N, as price increases have affected almost all trade lanes (not limited to Asia export only). Furthermore, shipping lines are reducing free times and detention periods.

Further hampering global logistics is the IMO (International Maritime Organization) 2023 impact. Being EEXI (Energy Efficient Shipping Index) and CII (Carbon Intensity Indicator) compliant will reduce the Co2 emissions as well as the capacity available. In his presentation, Rooney explained that as from 2022, most of the 6,000 container ships worldwide will go on drydock to make technical changes to reduce CO2 emissions, which will temporarily limit the capacity. To remain compliant, most of the vessels will have to reduce their speed, as a result, more ships will be needed to maintain weekly frequencies, reducing further global capacity.

Looking ahead, the ‘likely’ scenario for 2022, per Kuehne + Nagel, is:

  • Robust GCP growth for the US and world (4%-5% IMF, although US Q1 estimates have been reduced);
  • Demand for products continues to be above pre-Covid norms;
  • Consumer (and goods) spending (globally but particularly in the US) remains high relative to history;
  • Global cargo volumes grow at 4%-6% (based on various sources);
  • By year-end congestion moderates some but remains a global problem with the epicenter being North America;
  • Rates at the top-level moderate somewhat but overall rates remain historically very high relative to pre-Covid levels.

So, the takeaway seems to be that 2022 will apparently be a continuation of what we saw in 2021 – seeing several of the same issues – with some moderation possible (e.g., the sea logistics market returning to normal) but not likely until the second half of the year.

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