Posts Tagged “port congestion”
Prices of shipping containers have fallen by two-thirds this year after reaching figures tenfold on major trade routes during 2021, according to Investors’ Chronicle. Rates slowly began falling in the third quarter of 2022 and are expected to continue to drop, the outlet reports.
The estimated cost of shipping a 40 foot container from China to the U.S. West Coast has dropped by 84% since the start of April to $2,470, according to Freightos Baltic Index.
Although the rate is 86% lower year-on-year, it is still 80% higher than in October 2019, before the onset of the pandemic.
Shipping container prices for routes between China and northern Europe began their decline in January, Freightos’ head of research Judah Levine said.
The executive quoted the hit to disposable incomes from higher inflation and the shift in spending from goods to services as the two main factors for the decrease.
Consequently, as lower demand sets in, the congestion issues that have affected major ports around the world is also starting to ease. Prior to the pandemic, only around 3% of global container ships were held up due to this problem. Today, this affects 8% of vessels, a considerable drop from 14% in January 2022.On the other hand, contract rates are also in decline. Shipping data firm Xeneta’s index tracking contract rates from China to Europe recorded its biggest ever month-on-month drop of 8% in October. However, the figure is still 64% higher than in January 2022.
The port of New York and New Jersey, following a historic flux during August, jumped to the first place as the U.S. busiest shipping port, CNBC reports.
The publication notes that container processing totalled a combined volume of 843,191 TEUs between imports and exports. However, the East Coast gains have led to congestion in Savannah, Houston and NY/NJ.
Kevin O’Toole, chairman of the Port Authority, told the outlet: “We are exceeding pre-Covid numbers. Our planning with rail to complement the actual infrastructure and the dredging are allowing this added capacity that would not have happened four or five years ago.”
This comes as the flow of trade continues to move away from the West Coast with logistics managers worried about a labor strike or lockout.
“While volumes are up, the congestion at the East Coast ports may be at an inflection point after months of record-breaking import levels,” Josh Brazil, vice president of supply chain insights for Project44, toldCNBC.
The Port of Los Angeles ranked third in August, moving 805,314 total containers. That was 37,877 less than the Port of New York and New Jersey, which moved 843,191. The Port of Long Beach came in second, moving 806,940 export and import containers.
The worst congestion is plaguing U.S. seaports “since the age of containerization”, according to Logistics Management.
The publication credits backlogs of imports coming into the country, a shortage of equipment, and inland blocks as the main causes for this situation.
“U.S. seaports face the unprecedented situation where they’re now in their 17th straight month of record container import volume,” says Chris Jones, executive VP of industry and service at Descartes Datamyne.
“Consequently, continuous and shifting congestion and delays, and unpredictable lead times for importers has resulted”, Jones shared.
Presently, the ports of Los Angeles (POLA) and Long Beach (POLB) handle approximately 40% of U.S. imports. On the other hand, the port of New York and New Jersey processed 4,651,094 TEUs in 2021, ranking in third.
Consistent problems
Schedule reliability remains a significant problem for carriers, the outlet states. During 2021, West Coast ports reported long delays, with the East and Gulf coast ports now experiencing the same.
Meanwhile, seaports remain flooded with containers as labor negotiations on the West Coast are ongoing. Discussions have significantly affected shippers who remain concerned about slowdowns and potential strikes, Logistics Management reports.
East Coast North America container ports congestion worsened as more ships diverted to avoid West Coast gridlock, further delaying the flow of goods to consumers and driving up costs, according to S&P Global Platt.
There where were 31 ships anchored off the Port of Charleston, South Carolina, Feb. 22 while another 13 were waiting off the coast of Norfolk, Virginia, according to Platts cFlow trade-flow analytics software.
At the Port of Houston, 11 ships were anchored in queue to berth and near the Port of New York and New Jersey, nine ships were queued.
“We’ve had our boxes sitting and waiting to enter New York/New Jersey for more than two weeks,” an importer based on the East Coast said. “It’s impacted us for sure but with nearly all ports facing the same situation, there’s nothing we can do to avoid it for now.”
Port congestion at the Los Angeles/Long Beach port complex still overshadowed the East Coast, with 66 ships in queue to berth Feb. 22, down from a record of 109 ships on Jan. 9, according to the Marine Exchange of Southern California.
Platts cFlow data showed four ships anchored near the ports with one drifting nearby. The Safety and Air Quality Area was established in November to reduce air pollution by keeping waiting ships 150 miles off the California coastline, and many shipping lines electing to slow steam the trans-Pacific voyage to save on fuel.
Other West Coast ports have reduced congestion during the Lunar New Year slowdown in China earlier in February. There were nine ships in queue at the Port of Vancouver and six ships waiting to berth at the Port of Oakland, while Seattle-Tacoma had eliminated its queue by Feb. 22, according to cFlow.
Meanwhile, the number of container ships waiting for berths in Los Angeles/Long Beach has continued to decline, falling to 66 on Wednesday — as low as it was back in mid-September.
The longer voyage from Asia to the US East Coast through the Panama Canal loses its appeal if wait times for transit are long at arrival, however, shipping lines are looking to increase rates on the route in March with increased demand.
The Port of Savannah was one bright spot, having eliminated its queue of ships at anchor by deploying five pop-up container yards across the Southeast US to move cargoes out of port terminals. A buildup of cargoes and equipment in the ports tends to slow productivity.
Market participants will closely watch developments with the International Longshore and Warehouse Union representing West Coast port workers, whose multi-year contract with shipping lines and marine terminals expires July 1. West Coast port operations were disrupted for months when contract talks hit an impasse in 2014-2015, causing many shippers to divert to the East Coast wherever possible.
“A West Coast labor strike could be the biggest issue for shipping this year,” a US-based freight forwarder said. “That could see widespread force majeure declarations on contracts between [cargo owners] and shipping lines, and a huge swing in higher spot rates to the East Coast.”
Shipping lines are being urged to route more cargo to California’s Port of Oakland as a result of supply chain calamities elsewhere.
Port officials report its marine terminals are congestion-free, unlike competing ports crippled by record global trade volumes. It urged restoration of shipping services that have bypassed Oakland since summer.
The Oakland port notes there is no congestion and is ready for more business.
It wants ocean carriers to reinstate services in order to stabilize the supply chain, noting its import and export partners echo this sentiment.
The Port said containerized cargo volume is up 4.2 percent in 2021 but insisted there’s capacity for more as it hasn’t experienced vessel backlogs since August. That’s in stark contrast to Southern California ports where up to 70 ships daily wait at anchor for berth space.
Ports on the west, gulf and east coasts have reported crippling delays in moving cargo and the White House recently called on some facilities to open nights and weekends to move out cargo. However, the government’s response is reported to have minimal effect in easing port congestion.
Oakland said shipping lines can help ease the gridlock by steering ships back to Oakland. Several ocean carriers omitted Oakland in recent months, the Port said.
It explained that excessive Southern California delays necessitated immediate return of some ships to Asia without stopping in Oakland.
According to the Port, 54 vessels stopped in Oakland last month which was the lowest vessel call total since 2015. As a result, September import volume declined 13 percent from September 2020 and exports were down 18 percent.
It expects service restoration to begin next month as supply chain congestion continues and it said vessels would find clear sailing to berth without gridlock.
Import cargo would be available for pick-up within days of discharge from ships which hasn’t been the case at some ports where congestion has trapped import containers for weeks.
Shipping line Maersk has provided a market update on the challenging global logistics situation, saying that port congestion and supply chain bottlenecks are to persist through year-end.
China’s October Golden Week, Christmas and Chinese New Year will bolster strong demand for container shipping for the last quarter of 2021. But port congestion, especially in the U.S. and Europe, and service delays are expected to create headwinds for service schedules, the company said.
Maersk says extra loaders (additional ships) and ad hoc port omissions will be implemented to help improve schedule reliability. Meanwhile, inventory levels in Europe and the US remain at their lowest levels on record, leading to stock outs on some products.
This means even once retail demand declines, we will see cargo volumes continue to remain strong as inventory levels need to be rebuilt, Maersk said.
Global container demand growth is projected at 6%-8% in 2021, reflecting strong first-half as well as ongoing demand strength in the U.S. and partly in Europe. While container demand growth has ran ahead of supply growth since the second half 2020, the true drivers of high freight rates are congestions in ports and supply-chain bottlenecks, Maersk says.
Vessel waiting time at ports has increased requiring more ships per string to lift same cargo volume. At the ports of Los Angeles and Long Beach, waiting times rose with over 70 vessels anchored in mid-September.
Covid-19 has also led shutdowns that have delayed vessels from Asia. Warehousing capacity has also been reduced due to port and landside congestion, while returning empty containers back to Asia remains challenging.
“Maersk has taken many actions to redirect flows back to Asia to ensure we have equipment supply. Despite this, equipment turn-round times continue to increase driven by landside and seaborne delays,” says Maersk.
To address capacity and equipment shortages, Maersk says it has taken measures to alleviate this by rationalizing its schedules and repositioning empty containers. The company has also tripled the number of dry freight containers in its fleet during the last few months to support customers’ export requirements.
“However, In-fleeting of new containers alone is no longer sufficient to meet overall demand, so it remains critically important that import containers are turned around as quickly as possible,” Maersk said.
In Vietnam, hundreds of factories have remained closed under COVID-19 lockdown rules, with many expected to reopen from early October as local restrictions are lifted.
Major port update
- Ports in Asia Pacific continue to be severely congested. With continued high yard density issue and weather disruption since July (i.e. 3 typhoons and 6 tropical storms), operational challenges remain in port operations and the situation is not expected to improve in the immediate future.
- Ports of Los Angeles and Long Beach congestion levels continue to deteriorate as we move further into peak season with 70+ vessels waiting at anchorage recently. Labour restrictions coupled with high throughput volumes remain the primary constraint.
- Port of Savannah has become increasingly challenging recently as congestion across the East Coast picks up. There were around 30+ vessels at anchorage with wait times upwards of 7 days in mid-September.
- Port of Seattle continues to struggle with available yard capacity. Waiting times have increased to 11/12 days and the typical port stay lengthening from 3 days to about a week.
- UK Ports are operating smoothly but with very severe trucking shortages across the country, leading to high yard density in ports. Port of Rotterdam is also seeing trucking shortages although not as severe as UK.
- Ports in Latin America: Port of San Antonio continues to be congested causing further delays. Port of Lazaro Cardenas – railways continue to be blocked by protestors. We suggest customers to move cargo to Manzanillo where possible.
Air freight
Regarding air freight, Maersk says 2021 Q4 is expected to be “one of the strongest peaks the industry has seen with demand surpassing 2019 levels”.
New technical product launches and winter fashion products together with continued ocean freight disruption are expected to push demand higher even as capacity has yet to return to pre-COVID levels.
“Rate levels, already at all-time highs, are set to increase further in Q4. Most of the major trade lanes such as transpacific, Asia-Europe and transatlantic will be impacted,” it said.
“Maersk is securing commercial airlines and ad hoc charters to address capacity issues and secondary airports to help overcome COVID-19 related airport restrictions. We are also offering our multimodal Sea-Air service to customers on the Asia-Europe trade lane to meet demand.”