An aerial view of containers and cargo ships at the Port of Los Angeles on January 19, 2022 in San Pedro, California.
Qian Weizhong | Visual China Corporation | beautiful pictures
Tens of billions of dollars in trade is located inland or at sea in the United States and in Europe as congestion at ports grows.
According to MarineTraffic, about 460,000 20-foot container equivalent units (TEUs) were loaded onto ships waiting in East Coast ports and 180,000 TEUs were loaded onto ships off West Coast ports as of July 13.
A key component in this picture is supply chain inflation and its impact on what consumers will ultimately pay for goods.
According to data from MDS Transmodal, the nominal value of goods transported in containers, as measured at the global level, has increased by nearly 9% from 2019 to 2021. But Antonella Teodoro, senior advisor at MDS Transmodal, explaining that considering that the average annualized increase in the previous two years is in the range of 0.7%, “it can be believed that the main cause of the estimated increase over the past two years is the escalating freight rates.” .”
MDS Transmodal estimates the total value of trade stranded on water at about $30 billion.
Fear of a U.S. Railroad Attack
On Monday, the 30-day period of the Railroad Labor Act ended, which raised fears of a strike and pushed the Biden Administration into issue an executive order on Friday afternoon, preventing a rail union strike from happening immediately. Contract negotiations have been ongoing since the contract expired in 2020.
A coalition of US importers has urged the Biden administration to create a Presidential Emergency Committee (PEB) to help the nation’s largest railroad companies and rail labor groups reach contract agreements. .
Biden formed an emergency committee on Friday to investigate disputes between rails and unions as they “threate to substantially disrupt interstate commerce to a degree that would deprive transit essential load of a domestic department” and will report back to the president within 30 days.
The most recent US rail strike in 1992 is believed to have cost the US economy $50 million per day, a rate that would have been higher in the event of a strike. nowadays.
According to logistics firm Woodland Group, unions say the standoff has left trains dangerously understaffed and staff overworked, while the National Railroad Labor Conference has issued a objections include retroactive compensation and substantial salary increases.
Port of California piled up
Meanwhile, piles of containers lined up for railroads at the Port of Los Angeles and Long Beach continued to pile up.
The Port of Los Angeles told CNBC that a total of 19,665 rail containers were waiting nine days or longer, while the Port of Long Beach reported a total of 13,819 rail containers waiting in the same timeframe. More than 60% of the total containers waiting at these ports are destined for rail.
The approximate total trade value inside those containers is estimated by MDS Transmodal to be more than $1.54 billion.
“Railway containers continue to pile up at ports in record numbers,” said Noel Hacegaba, Executive Vice President of Management and Operations for the Port of Long Beach. “We need those boxes moving to create more capacity and keep the economy moving.”
These long-standing containers clog the port’s land capacity, impeding the movement of commerce within the port. The land capacity at the Port of Los Angeles is 90%. For efficient land use, 70-75% is the optimal target. Due to this increase in container volume, vessel handling takes longer.
German port labor war
Wage negotiations between the German labor union and port owners reached an impasse again leading to a 48-hour strike from Thursday morning until Saturday morning.
According to sources, a court-ordered “peace obligation” could mean no further strikes except the current one until August 24. Despite the court ruling. only officially applies to the Port of Hamburg, but sources say there is an assumption there will also be no strikes at other locations during this time.
According to CNBC’s Supply Chain Heat Map for Europe, the fluidity of trade is gone.
“The worse situation in Hamburg with almost 200,000 TEUs waiting to berth suggests that wait times will be higher in the coming months,” said Alex Charvalias, head of supply chain for in-transit visibility at MarineTraffic. next week.”
Andreas Braun, Product Manager Europe, Middle East and Africa at Crane Worldwide Logistics, says the availability of empty containers will affect commercial deliveries.
“Containers are not readily available at terminals nor at domestic warehouses,” Braun said. “Shingers are having serious problems moving shipments back to Asia,” he said. This will reduce their ability to supply exports in Asia.
All of this is happening, Braun notes, before high season begins on the western Far East trade route.
“European importers have to wait for a delay to receive their Christmas orders. For the United States, European trade is also being delayed,” he said.
Chinese Trade
Increasing port congestion in Europe and the United States has caused logistics managers to now scrutinize the rate of canceled or vacated trips announced by ocean carriers, which has been on a downward trend. in recent weeks. Traditionally, sailings have been canceled by shipping lines in an attempt to make up time and regain schedule reliability. Another reason is lack of demand. As the volume of containers shipped out of China is still high, the reason behind the recent cancellations is related to the schedule.
According to Sea-Intelligence, the carrier’s schedule reliability is about 36.4%.
Canceled trips limit the availability of seats on board, which can drive up freight prices. Currently, the spot price is below the long-term contract price, which has not happened in many years.
According to CNBC’s Supply Chain Heat Map for China, vessel availability is not currently an issue.
While vessel availability is strong, that could change in August if ocean carriers decide to skip certain US ports in order to boost trade at a faster pace.
Logistics managers told CNBC they wouldn’t be surprised if this happened.
“As congestion grows on the East Coast, ports may be overlooked,” said Alan Baer, CEO of OL USA.
This story has been updated to reflect an executive order the Biden administration issued Friday afternoon regarding a labor dispute between the railroads and unions.
Supply Chain Heatmap data providers CNBC is the global freight booking platform Freightos, creator of the Baltic Freightos Dry Index; logistics supplier OL USA; FreightWaves supply chain intelligence platform; supply chain platform Blume Global; third-party logistics provider Orient Star Group; marine analysis company MarineTraffic; marine vision data company Project44; maritime transport data company MDS Transmodal UK; a Xeneta analytics company that benchmarks air and ocean freight; the company’s leading provider of Sea-Intelligence ApS Research & Analysis; Crane Worldwide Logistics, and air and cargo logistics provider SEKO Logistics.
