China’s shipments are way down, but US ports are still struggling

An American flag is seen on the container ship President Eisenhower at a port in Qingdao city, east China’s Shandong province, Thursday, Dec. 23, 2021.

Yu Fangpin | Future Publishing | Getty Images

Shipping companies continue to cite congestion in US and Canadian ports as the reason for canceling sailings in September, a cutback in vessel service highlighted in previous CNBC reporting, and the latest CNBC Supply Chain Heat Map shows that congestion is not abating.

“It comes as no surprise that ocean liners are closing (cancelling) sailings,” said Alan Baer, ​​CEO of Olympic USA. “It has to be done to regain some kind of schedule reliability.”

The result is that all of these ships will now be out of position for return voyages, moving containers, loading US exports and ultimately being able to load imports.

“Much of this was the result of moving cargo away from USWC arrivals because of the risk of labor disruptions,” Baer said.

MarineTraffic has tracked an increase in the number of ships anchored off East Coast and Gulf ports.

More complications for East Coast ports are expected as a result of the strike at Felixstowe, which could hit US imports as the backlog begins to clear, according to Capt. Adil Ashiq, director of the US western region for MarineTraffic.

“This means that holiday goods may end up hitting the shelves closer to the start of the holiday season – it may make sense to seek alternative modes of transport if possible,” Ashiq said.

According to MarineTraffic data, the Port of Savannah has 39 ships at anchor. In the Gulf, at the port of Houston, there are 22 cargo ships at anchor.

Port congestion has shipping lines, most recently MSC, announcing changes to its vessel schedule. In July, Seko Logistics and Worldwide Logistics explained to shippers that the congestion on the east coast affected the arrival of ships back to the port of Shenzhen for transshipment.

The rise of containers on the East Coast is benefiting the warehouse sector, where storage costs are rising rapidly on the East Coast, up 8 percent since January, according to Jordan Brunk, CMO of WarehouseQuote.

West Coast pricing has dropped consistently in the past two months, but Brunk still described prices as “expensive.” But he added: “We’re seeing a shift of cargo that was traditionally held on the West Coast now moving to the Northeast and Southwest.”

China, production orders and ocean bookings

All the congestion in the ports distorts the impact of the drop in container bookings due to the pullback in production orders. FreightWave’s SONAR shows that future import container orders continue to decline.

Ocean booking levels from China to major west and east coast ports remain far from their two-year highs, according to Tony Mulvey, senior analyst at FreightWaves.

“As booking levels, which indicate future import volumes, continue their decline, peak sea demand looks subdued,” Mulvey said. “Softer demand at sea is leading carriers to increase the number of blank sailings in an effort to slow the rapid decline in trans-Pacific spot rates.”

Unlike last year, and even just months ago, when there was an extreme lack of space, the space is currently open to all lanes and ocean liners are pushing for more bookings with freight adjusted weekly and some daily, according to OrientStar Group.

The latest ocean freight rates tracked by Freightos show the rate from China to the West Coast has dropped six percent to $5,759. China to the East Coast has fallen 3 percent to $9,184. On the flip side, Europe to North America and China to Europe are both up due to massive port congestion due to the strike at Felixstowe and the earlier labor dispute in Germany.

On Wednesday, an agreement was announced between the ver.di union and the German ports, but Crane said it will take until the first quarter of 2023 for the congestion to be cleared.

Sources with knowledge of the German deal tell CNBC that the union will make their final decision in two weeks. The agreement includes a 9.4 percent wage increase retroactive to July 1 for the container sector, followed by another 4.4 percent increase from June 1, 2023. The agreement was approved by the union’s bargaining committee with a vote of 18-2. There will be no more strikes until March 2024.

The current strike at Felixstowe is slowing $4.7 billion in trade. Andreas Braun, product director for Europe, Middle East and Africa Oceans for Crane Worldwide Logistics, told CNBC that it will take at least two months for the container backup to be cleared out.

The trade union Unite has warned that the port disruption could last until Christmas if the demand for ten per cent wages is not met. Sharon Graham, general secretary of Unite, says CK Hutchison Holdings, the company that owns the port, can afford the increase as a result of its record profits.

“The ripple effects of the strike will largely depend on how long it lasts,” said Josh Brazil, vice president of supply chain insights at Project44. “If strike action lasts the full eight days or longer, massive delays could be seen across the UK, with knock-on effects to the EU as containers are diverted to other ports such as Rotterdam or Le Havre. What’s more, many UK and EU ports are already experiencing maximum capacity volumes, so their ability to handle even more may be limited,” Brazil said.

According to bills of lading leaving Felixstowe, companies including Amazon, General Mills, Loreal, GSK, Bacardi, Kellogg, Mars Foods, Diageo, the company that owns Guinness, and Suntory, which owns Jim Beam, all use the port to transport their products .

The strike will also affect US companies and industries that export to the UK Levi’s and Black & Decker export to this port, as does Mallory Transportation, which moves motorcycles; JF Hillebrand, who carries California wine; Ocean Spray, Nutrition and Biosciences (which merged with IFF) and Brown Forman, the company that owns Jack Daniels. Becton Dickinson and Archer Daniels Midland also export their products to this port.

CNBC Supply Chain Heat M-onep data providers are artificial intelligence and predictive analytics company Everstream Analytics; global freight booking platform Freightos, creator of the Freightos Baltic Dry Index; logistics provider Olympic USA; supply chain intelligence platform; FreightWaves; supply chain platform Blume Global; third party logistics provider Orient Star Group; marine analytics firm MarineTraffic; maritime visibility data company Project44; sea ​​transport data company MDS Transmodal UK; sea ​​and air freight rates benchmarking and market analysis platform Xeneta; leading provider of research and analysis Sea-Intelligence ApS; Crane Worldwide Logistics; and air, DHL Global Forwarding; freight logistics supplier Seko Logistics; and the planet, supplier of global, daily satellite images and geospatial solutions.

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