ocean freight

Cargo waiting to be loaded on cargo plane in the background

Logistics Market Update – August 2022

Logistics Market Update – August 2022 1920 615 Transmodal

The industry is used to hearing news about port congestion and ships loitering as they wait for berths—at least at the West Coast ports of Los Angeles and Long Beach. But the tide has shifted. As carriers try to escape the backlog in the west by moving to the east, the problem has followed along like an albatross. The Ports of Houston and New York now have as many containerships waiting for berths as Los Angeles and Long Beach combined.

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The summer saw still more lockdowns in China as COVID fears continued. Fortunately, Shanghai’s two-month-long lockdown was lifted and with it some speculation that leadership may relent—at least to some extent—on their zero covid policy. There is no escaping the impact on their economy, and manufacturers are becoming increasingly vocal about leaving the country and near-shoring production back to the US and Europe.

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According to a survey of 233 senior procurement executives done by Ivalua, nearly all procurement leaders—97% of them—say they are facing significant disruption in the direct materials supply chain. 67% say they have little to no confidence in existing technology, and 84% say modernization needs to be a priority.

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The Biden Administration is considering a relief package that will roll back some of the tariffs that were previously imposed on China during the Trump Administration—which raised prices on everything from diapers to clothing and furniture. The expectation is that a modest list of tariff suspensions will tamp down inflation.

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The FMC has a bit of a conundrum. Back in June, a vote was passed, giving them more power to handle allegedly unfair business practices carried out by ocean carriers and marine terminal operators. But now they’re saying they don’t have enough staff to enforce reforms. According to FMC Commissioner Carl Bentzel, “We have major rulemakings we’ll be starting in the short term but very few people to do the work, so we’re wrestling with that.”

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Bow of docked cargo ship at dusk

Logistics Market Update – July 2022

Logistics Market Update – July 2022 690 518 Transmodal

Sluggish supply chains could get even slower going forward. The green shipping initiative has had the industry concerned about increased costs, but now decreased speed could be a factor as well. This is because of the lack of insight shipping companies have into what type of fuel they’ll need to use. To offset that lack of knowledge, they’ll continue to use older vessels. The problem is that those vessels will need to run more efficiently and that could translate into them sailing at slower speeds.

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For some good news on the high seas, the ICC International Maritime Bureau (IMB) reports that the period between January to June 2022 had the lowest incident rate of piracy since 1994. Of the 58 incidents reported—there were 68 in the same period in 2021—there were 55 boardings, two attempted boardings, and one hijack. Despite the lower numbers, the IMB reminds the industry that it’s not the time to be complacent since the number of boardings remains high.

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California’s AB5 law has truckers protesting. The law restricts independent owner-operators, forcing them to be reclassified as employees. In response, a protest at the Port of Oakland forced its closure. Truckers blocked gates and access to the port’s container terminals. West Coast ports are already dealing with congestion and contract negotiations, so this new issue adds more stress to an already fragile supply chain.

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Speaking of ships, in a world of super-sized container vessels, the tide has turned—at least in the commodity trades market. Small ships are outperforming larger vessels by a significant amount. According to a report from Clarksons Platou Securities, Spot employment for smaller bulk commodity ships costs more than for larger ships — in most cases, a lot more.

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Moving to the East Coast, ports there are starting to deal with the same pain West Coast ports have been facing since early in the pandemic. Ships that are hoping to escape the congestion issues at the Ports of LA and Long Beach are moving east and shifting congestion at the same time. The McCown Report by Blue Alpha Capital states that the number of container ships waiting for a berth on the East Coast is much higher than usual, despite an overall drop in the number waiting country-wide.

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