Depot closure, empty returns snarling NY-NJ port truckers

Michael Angell, Associate Editor | Mar 12, 2021 12:08PM EST, JOC.com

The sudden closure of a major storage yard near the Port of New York and New Jersey has forced truckers to scramble for new places to store empty containers, affecting their ability to deliver loaded imports in a timely manner as the port deals with record volumes.

Drayage carriers say the episode underscores the ongoing problem of ocean carriers diverting empty container returns to sites other than where loaded imports are picked up, a problem that truckers say has gotten worse this month and drives up costs to shippers.

“The empty returns are another hurdle that is reducing our productivity,” Rob Movshin, regional vice president for drayage carrier ContainerPort Group, told JOC.com. “The first mile and the final mile in the international supply chain are the most important, but they are most stressed.”

Beth Rooney, deputy director at the Port Authority of New York and New Jersey, said empty returns affect port productivity by unnecessarily tying up driver time that could be spent delivering imports. She said the port authority is working with ocean carriers to increase their empty sweeps and looking for places where truckers can easily store empties.

“We need creative thinking on where to stage empty containers since we still have loads piling up at terminals,” Rooney said.

The port experienced its busiest two months for empties in the past four years recently — 246,859 TEU in December, followed by 241,154 TEU in January, according to port authority data. Those figures account for about one-third of total container volume coming through NY-NJ.

The issue of empty returns in NY-NJ resurfaced this month after port truckers were informed that Ironbound Intermodal Industries would be closing its Delancy Street yard in Newark. A memo from Ironbound said the “amount of equipment that enters our depot along with the associated repairs can no longer support the area in which we operate.”

Delancy provided storage for up to 12,000 containers, according to people familiar with the operation. Hapag-Lloyd, Ocean Network Express, and Cosco Shipping were among its customers, they added. It also served as a chassis depot for intermodal equipment providers.

Members of the Association of Bi-State Motor Carriers, which represents regional drayage carriers, relied on Ironbound as a relief valve for storing empty containers. Despite Ironbound being closed for container storage as of Feb. 19, Bi-State members said they weren’t informed of the closure until a week later.

“That came as a shock to all of us,” Movshin said.

With Ironbound closed, truckers were instead directed to bring empty containers to C&C Marsh Street Depot, another container yard in Newark.

However, a flood of empty returns there caused port authority police to temporarily turn away truckers from C&C on March 3 and 4 due to the resulting traffic jam on the main road serving the Port of Newark, according to an alert from the port authority.

In the interim, truckers were forced to bring empties back to their own yards, which are already full, or find other drop-off sites, Movshin said.

Those diversions meant truckers couldn’t pick up import loads, Movshin said. Truckers were also unable to reuse their chassis for an import load because it was still attached to an empty container, he said.

“Because C&C was overwhelmed by the volume of containers, they were not able to service the community,” Movshin said. “Because the chassis are in such demand, there’s no guarantee you can get a bare chassis at one of these pools or depots and you have just failed at that move.”

“After enduring snow delays and the high volumes in February, we were hoping to capitalize on the good weather in March,” Movshin said. “But this was another punch in the face.”

Empties continue to be diverted

Yet empty container diversions are continuing into March. Cosco Shipping said it would not take empty returns at Maher Terminal and the nearby Columbia Container Service depot on Thursday. It requested that drivers hold on to empties until Friday, when it anticipates gates will reopen, but it didn’t offer alternative drop-off locations for empties. Maersk also blocked truckers from returning some empties to APM Terminal on Tuesday.

Maersk waived per-diem fees for late container returns. However, Movshin said the waivers don’t make up for the lost productivity of empty containers sitting on chassis leaving drivers unable to pick up loaded containers.

Unlike Maersk’s automatic waivers, drayage carriers are more frequently required to document every step where the return of an empty container delayed picking up an import load in order to get ocean carriers to waive per-diem fees, Movshin said.

It’s also common for ocean carriers to change instruction to drivers with less than a day’s notice on where they return empties, said Lisa Yakomin, president of the Association of Bi-State Motor Carriers. Those changes force drayage carriers to switch up their dispatch plans for truckers for the following day, she said.

“Our members need at least 24 hours advance notice in order to properly plan their day,” Yakomin said. She said requiring drivers to drop off empties at sites other than where they pick up import loads cuts drayage productivity in half.

“Not only does this cause frustration for the driver, it also wastes valuable hours of service time, and in some cases, causes them to miss appointments for pickups at other terminals,” Yakomin said.

Port asks for better plans for empties

The problem of empty returns is not new at the NY-NJ port, where only about one-quarter of truck moves are a so-called double move with an empty delivered and import picked up, according to port authority data. The Federal Maritime Commission specifically called out empty container returns as one focus area in its probe of US port congestion.

Rooney said the issue of where to put empties stems from the limited space currently at the region’s marine terminals which are still grappling with a flood of loaded imports. Loaded containers are sitting on NY-NJ docks on average eight to 10 days on average, nearly twice their normal dwell, she said.

Empties also build up in the region because NY-NJ is the first port of call along the US East Coast. Container ships can’t regularly take back empty containers from the Northeast because they are loaded with imports for the US southeast, and they also need room to take their loaded exports.

“The ships are coming at us fully loaded,” Rooney said. “The terminals are stretched to capacity because the empties are not moving back at the rate they should.”

Rooney said ocean carriers are sending in extra ships in the next two weeks to lift empties from the region. However, she said ocean carriers need to develop stowage plans that will more routinely sweep terminals for empties.

“One of our asks for the ocean carriers is that they increase the empty loading factor,” Rooney said.

Along with the extra ships, Rooney said the port authority is looking at finding additional space near the port to make up for the loss of Ironbound. Although the port has identified several possible parcels, Rooney said finding labor and equipment for the site adds another challenge.

She said the port authority is speaking with the Ocean Carrier Equipment Management Association on developing more long-term plans for double moves at marine terminals. It is also emphasizing the need for ocean carriers to not make last-minute changes to empty return instructions so that drayage operators can stick to their dispatch plans.

“We need to understand how the truckers need to plan their day,” Rooney said.

Vestager to examine competition in red-hot container market

By Louise Wendt Jensen, Astrid Sturlason – Published: 08.03.21 at 14:59, ShippingWatch.com

EU Competition Commissioner Margrethe Vestager now plans to scrutinize the extreme situation unfolding in the global container market together with the industry. The EU will subsequently “consider ways forward,” a spokesperson tells ShippingWatch.

Copenhagen/Brussels

The European competition authorities will now – together with the industry – examine the current conditions in the global container market. Conditions that have so far been criticized by both US and Chinese authorities.

Rising freight rates, growing container shortages and major delays have long been the consequence of a red-hot market that has seen extraordinary demand for transporting goods from Asia to Europe and the US during the coronavirus pandemic.

“We are discussing with market participants, i.e. shippers, freight forwarders, port operators, carriers, to fully understand the current circumstances, and consider ways forward,” says a spokesperson for Margrethe Vestager, EU executive vice-president and competition commissioner, in a comment to ShippingWatch.

“It seems that these price increases were caused by a combination of factors, such as fluctuating high demand, port congestion, and shortage of containers, in markets which are intertwined at worldwide level,” the spokesperson continues.

This is the first time the EU exhibits such a clear reaction to the current situation in the container market, seeing as the EU’s stance is often more tentative and based on a requirement that evidence must first be presented – at least if it concerns a possible breach of the container liners’ particularly favorable competitive conditions.

The rate boom and current customer dissatisfaction with the low service levels have already led authorities in both the US and China to speak up. The Chinese authorities last year summoned the world’s largest container lines to a meeting in which they were urged to curb rates.

The Federal Maritime Commission in the US has also upped its surveillance of the three large container alliances, under which the world’s largest container lines have organized themselves.

Criticism of liner companies

Shipping companies such as Maersk have been under scrutiny from the US authorities, which now demand monthly updates from the carriers in order to monitor the market. Previously, these updates were only given quarterly.

Maersk has – like many of its competitors – acknowledged that its service is currently substandard, but the carriers also all refer to the extraordinary circumstances created by the Covid-19 pandemic.

“We’re actually dismayed by the level of service we’re forced to provide right now,” said Maersk CCO, Vincent Clerc, recently.

“It doesn’t feel like a big high five moment right now. It feels like a moment where too many customer promises are not being delivered on and we are all hands on deck in trying to alleviate the situation,” he said.

Maersk CEO Søren Skou has set a stated target of bringing the company’s reliability up to between 85 and 95 percent as early as 2021. In January this year, this figure sat at 46.3 percent for Maersk’s ships against 76.4 percent in January last year.

Criticism from US agriculture

In the US, associations like the Agriculture Transportation Coalition and transport associations such as HTA have voiced their opinions. Just last week, Global Shippers’ Forum also voiced its criticism.

In a new review, GSF criticized shipping companies for continuing to provide poor service while cashing in record-level rates.

The industry association’s quarterly survey, conducted by MDS Transmodal, examines eight key performance indicators (KPIs).

“Importers and exporters around the world are paying record high shipping rates but receiving appalling levels of service reliability,” asserts Global Shippers’ Forum in the review.

Difficult for shippers to resolve

Organizations the European Association for Forwarding, Transport, Logistics and Customs Services (CLECAT) and European Shippers’ Council (ESC) have previously urged the European Commission to take action against the container lines, which they believe to be taking advantage of their special position and special competition exemption.

But so far, this has not been possible.

Because in order to do something, the two associations must either submit a formal, well-founded complaint about the competitive conditions or wait for the EU to, at some point, begin their evaluation of the so-called Block Exemption Regulation (BER).

BER is a special competition regulation that allows the container majors to coordinate their efforts through alliances such as, for example, Maersk and MSC’s 2M alliance. With the alliances, container lines are able to coordinate their networks and utilize space aboard each others’ vessels, if their market share is lower than 30 percent, that is.

Derailment Impacting Intermodal Operations in Southern California

BNSF RAILWAY, BNSF.com | March 04, 2021 

BNSF experienced a derailment yesterday afternoon at Ludlow, Calif., approximately 60 miles east of Barstow. As this incident occurred on the Southern Transcon, our primary route between Southern California and the Midwest, rail operations have been significantly impacted. Both main line tracks in this location are currently out of service.

Engineering crews and equipment were quickly deployed to the scene. The first main track is currently estimated to reopen this evening, with the second main line back in service early tomorrow morning. With the high volume of intermodal traffic to/from California, customers with shipments designated to move through this corridor should expect delays until operations have fully normalized.
Gate allocations are being utilized at our Southern California intermodal facilities to ease congestion due to elevated inventories and car supply issues. Limiting gate activity will help expedite the pace of our recovery efforts once the affected main line tracks reopen.
As always, we remind customers that prompt pick-up of shipments will help improve traffic flows, reduce lot congestion and provide the space needed for processing inbound freight as expeditiously as possible. BNSF has multiple tools available for customers to track their shipments.
We appreciate your cooperation and quick response as we work together to rebalance equipment flows. Our operating teams remain focused on safely restoring service to the level you expect from us.

Global container carrier reliability plumbs new depths in January

Bill Mongelluzzo, Senior Editor, JOC.com | Feb 25, 2021 4:27PM EST

Global container vessel reliability fell to 34.9 percent in January, the lowest ever recorded, as ports around the world continued to struggle with near-record volumes for the sixth consecutive month.

“Global schedule reliability was down 33.5 percentage points compared to January 2020, and is now the lowest figure ever recorded by Sea-Intelligence [Maritime Analysis],” the maritime consulting firm said Thursday in its Global Liner Performance report.

Reliability in the eastbound trans-Pacific trades in January plummeted to 13.8 percent to the US West Coast, the second-lowest on record for the trade, and 21.5 percent to the East Coast, the lowest ever on that lane, according to Sea-Intelligence.

The late vessel arrivals help explain why US ports have been struggling since last summer to handle near-record volumes of US imports from Asia and why port congestion will likely linger through the spring months.

Drilling deeper into the numbers, Sea-Intelligence noted that the number of days vessels are delayed and must sit at anchor while awaiting berthing space continued to increase, an ominous sign for ports, especially Los Angeles-Long Beach, where vessels awaiting berthing space is a major contributor to congestion at the largest US port complex. The ports of Los Angeles and Long Beach handle about 50 percent of US imports from Asia, according to PIERS, a JOC.com sister product within IHS Markit.

On the West Coast, the average delay for late vessel arrivals in January increased to 10.28 days, up from 8.01 days the previous month and 3.46 days in January 2020. “This was the second-highest figure on the trade lane,” Sea-Intelligence said. On the East Coast, the average delay for late vessel arrivals increased to 5.53 days, up from 4.92 days in December and 3.63 days during the same month last year.

Schedule unreliability triggers logistics problems

Late vessel departures from Asian load ports, and late vessel arrivals at US ports, have triggered a series of logistics issues throughout the transportation supply chain. Vessel bunching at the ports, congested marine terminals, excessive container dwell times on the terminals, long truck lines at the gates, and equipment shortages have occurred to varying degrees at some US gateways.

At the same time, US ports continue to handle near-record imports from Asia. Imports exploded in late June as the US economy reopened after the first wave of COVID-19 closures last spring, and imports have remained strong ever since. According to the Global Port Tracker, which is published monthly by the National Retail Federation and Hackett Associates, year-over-year monthly double-digit increases in import volumes are projected to continue at least through June.

TPM21: CMA CGM’s Saadé blames disruption for elevated rates, low service

Greg Knowler, Senior Europe Editor | Feb 25, 2021 11:59AM EST

MA CGM Group chairman and CEO Rodolphe Saadé kicks off the TPM21 conference from his Marseille headquarters. Photo credit: CMA CGM.

Rodolphe Saadé, chairman and CEO of CMA CGM, told the virtual TPM21 conference Thursday that while he sympathized with shippers facing record-high rates and poor service, the current extreme price levels were a result of the disrupted markets.

But given the historically low rates in the years prior to the COVID-19 pandemic, Saadé said the container shipping industry needed overall rate levels to increase, and this would be a central part of new contract negotiations.

“Some customers may say they do not want to renegotiate every year and want a multi-year contract, others will say they want to take advantage of the market and do a spot negotiation,” he said. “We will adapt to the needs of our customers, but again, we cannot work for free.”

The trans-Pacific container shipping system in particular has sagged under a seemingly unending deluge of imports from Asia into North America. The most severe congestion is concentrated around the US gateway ports of Los Angeles and Long Beach, which are expected to see terminal congestion and vessel backlogs for at least the next two to three months.

Months of strong demand has led to the slow turnaround of containers within the overwhelmed US inland logistics system. The slow return of containers to Asia has led to equipment shortages in China, leaving shippers struggling to get their cargo loaded and transported.

“I am telling our customers I understand their frustration, but we are going through exceptional times,” Saadé told attendees. “Volume from Asia, and from China especially, to various destinations is extremely high. We are doing our best to find equipment and going on the charter market to find vessels, but it is not easy. We are doing our best but would like them to be patient.”

But Saadé conceded that the service levels being provided by carriers had to improve. Data from Sea-Intelligence Maritime Analysis shows on-time performance in January from Asia to the West Coast of North America fell to 13.8 percent, down from 68.1 percent in January 2019.

“We cannot say to our customers, ‘You have to pay the price, but I am not going to give you containers, and I’m going to blank sailings every week,’” he said. “Blank sailings are not solutions. We were forced to do so during COVID, but they should not be used. As a shipping line it is more important to offer a good service.”

Ships, terminals are costly assets

However, Saadé said the CMA CGM was investing heavily in technology and assets such as terminals and vessels, and that came at a price. He hammered home the point that, despite the current spike in rate levels, prices have been too low for years.

“Today the period is exceptional with extremely high rates because of the COVID-19 situation, but there needs to be an understanding that we cannot lose money always, and that has been the case for many years,” he said. “Shipping logistics is very important to the industry, and that is why a decent price has to be agreed, otherwise we will be in trouble.”

Over the past decade, slow growth and a series of rate wars eroded carrier revenue and led to a series of heavy losses, sparking widespread industry consolidation and the bankruptcy of Hanjin Shipping in 2016.

But container shipping will certainly not be in any financial trouble this year, according to Peter Sand, chief shipping analyst at ship owner association BIMCO. In a market outlook released Thursday, Sand said rates will remain elevated, especially on the contracted side of the business where the bulk of the cargo is carried.

“The long-term contracts currently being negotiated and fixed will provide a solid income stream for carriers throughout the year,” he said. “As these account for by far the largest share of transported volumes and carrier income, the current strength of the contract market paints a promising picture for carriers’ bottom lines this year, even if rates on the spot market start falling.”

Vaccinations for LALB and Severe Weather Affects Rail

Lots of news coming out today in the world of transportation. 800 longshoremen in the ports of Los Angeles and Long Beach have received their first COVID-19 vaccinations. This will significantly help to reduce potential service reductions due to labor disruptions. Hopefully more states throughout the United States will follow suit and vaccinate their port and transportation workers.

With the severe weather that is affecting the majority of the country the Union Pacific Railroad will be closing most of their intermodal network due to snow and icy conditions. These conditions have affected transportation the Pacific Northwest, Midwest and as far south as Texas.

BOC will continue to monitor these stories and all those that affect global trade.

Severe Cold Weather Impacts Train Lengths

We would like to update you on the severe cold weather conditions that we are currently experiencing in some parts of the network impacting trains length in the following corridors:

  • Prince George/Kamloops to Edmonton: Tier 2 currently in effect
  • Edmonton to Jasper: Tier 2 currently in effect
  • Edmonton to Winnipeg: Tier 2 currently in effect
  • Winnipeg to Toronto: Tier 2 currently in effect
  • Winnipeg to Superior: Tier 2 currently in effect

Due to these extreme temperatures we reduced train lengths in accordance with our winter operations plan. Based on forecasts, we expect that Tier restrictions will remain in effect intermittently across the network during the month of February. We are actively monitoring traffic and will be in direct contact with customers with shipments at risk of delay.

For a daily snapshot of the current weather conditions across the CN network, our Winter Situation Report is now available on cn.ca. It is updated daily at 09:30 (ET). Severe cold and high snowfall present challenging conditions to safe railway operations, primarily to our braking system. As part of CN’s winter preparedness and train operating plan, when temperatures fall below -25C, to ensure safe train operations, trains length is restricted, resulting in longer transit times.

Trans-Pacific carriers aim to curb free time in annual contracts

Peter Tirschwell | Feb 08, 2021 8:01AM EST, JOC.com

Following a year in which extended possession of containers by many US importers, often due to pandemic-impacted warehouse productivity, resulted in widespread equipment shortages, ocean carriers are signaling they will be specifically taking aim at reducing contracted free time in 2021–22 contracts.

To the extent carriers are successful, this will force many shippers to either accept higher per diem charges or take potentially difficult steps to adjust warehouse operations so they can unload and return containers to carriers more quickly. The move by carriers could also impact drayage, forwarders say, by resulting in fewer opportunities for two-way moves by drayage drivers.

The global container shortage, which resulted from cargo owners essentially slow-steaming the return of boxes, was one of the key factors in the larger container shipping breakdown that materialized last fall and is expected to continue well into 2021.

According to one carrier executive, who asked not to be identified, “There needs to be some pressure on shippers, mainly consignees, to move their boxes quicker — that is, by reducing free time and chassis free time, so that we can see that [is implemented] in the current contracting.”

The executive said the pressure on free time will not necessarily mean changes for all shippers, just those who tend to hold equipment for longer periods of time. To avoid higher costs, those shippers will need to examine their warehouse and distribution operations in greater detail.

“For some customers, it doesn’t mean anything, because they are managing with 8 days of free time even if they have 20 in their contract,” the executive said. “But for those who have 20 days and it comes down to 10, but they operate at an average of 15 days, that has an implication on their cost exposure; it reflects how effective they are in managing their warehouse and intermodal business.”

Others agree.

“This will force warehouses to be more rigid with appointment scheduling, missed appointment penalties, possibly even forcing drop/hook facilities to look at more live unloads so they don’t get stuck with per diem,” said Duncan Wright, president of Cleveland-based logistics provider UWL.

The focus on free time is part of a larger effort by carriers to reset expectations of shippers, who for much of the past decade enjoyed the benefits of systemic vessel over­capacity and carriers’ willingness to be competitive on contract terms to obtain shippers’ business. Carriers have signaled to US exporters, for example, not to expect free repositioning of empties to remote export origin locations. With carriers having consolidated and exhibiting discipline on capacity, rates will almost certainly go up, but shippers will be forced to address operational issues such as turning containers or risk costs rising even beyond those base rate increases.

“In previous years, carriers were compelled to agree to shipper requests like additional free time, extending credit terms, providing chassis, and making legal boilerplate exceptions to retain customers. However, in today’s market, it seems they are now in a position to regain ground in these areas and only compromise with the most influential shippers,” said Bryan Most, senior vice president of retail at the New York Shipping Exchange (NYSHEX), a digital platform on which shippers and carriers can arrange mutually enforceable ocean freight contracts. “With the continued strength of this market, shippers are most likely looking at higher contract rates this year, and if some of the carrier concessions are not available, they will also need to quantify that impact on their operations — in effect, possibly adding additional costs to the supply chain.”

The carrier executive said much the same thing.

“The balance is coming back in a way where it’s not just a one-sided negotiation. That is the crux of the matter now,” the executive said. “It started last year, when we took a look at the contracts not only in terms of freight rates but with regard to the broader terms, such as credit, free time, all the different aspects, and we have started, beginning last year, to rein in some of those very generous terms that were out there in the market.”

Wright believes carriers clamping down on free time will impact drayage operations, as quicker turning of containers would limit drayage drivers’ ability to handle the two-way moves they say are essential to their efficiency.

“The drayage market is just as strained right now as the ocean carrier market is and the free time impact will likely have as large if not a larger impact on them as it does on the receiver’s facility,” Wright said. “If free time is impacted, this will put a significant strain on drayage operations, as truckers will likely be forced to spend more time bobtailing [i.e., driving with no container] to pick up containers for large drop-and-hook operations to avoid per diem.”

Contact Peter Tirschwell at peter.tirschwell@ihsmarkit.com and follow him on Twitter: @petertirschwell

Trans-Pacific trade crashes into max-capacity ceiling

Voyages canceled as volume and congestion overwhelm capacity

Greg Miller, Senior EditorGreg Miller, Senior Editor
Excerpted from www.FreightWaves.com, 1/27/21

It’s official: Container volumes in the Asia-U.S. trans-Pacific trade have hit their limit. Massive port congestion in the ports of Los Angeles and Long Beach is forcing ocean carriers to take extreme measures. Sailings are now being “blanked” (canceled) not because of lack of demand, but because of lack of tonnage as ships are stuck awaiting berths.

When ships fall behind schedule due to long waits in port, carriers normally add “recovery vessels” to take their place and keep weekly services going. There are no recovery vessels left. According to Hapag-Lloyd, “as our fleets are fully deployed and stretched beyond capacity, this is regretfully currently not an option.”

As a result, Hapag-Lloyd has blanked 19 sailings in February. “It is important to emphasize that vessels will not be idling at any time and we will perform as many voyages as possible,” stressed the carrier. Hapag-Lloyd is a member of THE Alliance along with Ocean Network Express (ONE), Yang Ming and HMM.

‘Need-to-get-back-on-schedule blanks’

“Schedule reliability is horrible,” said Simon Sundboell, founder of eeSea, a company that analyzes ship schedules. “These are not ‘pull-out-capacity blanks.’ These are ‘need-to-get-back-on-schedule blanks,’” Sundboell told American Shipper.

Carriers usually blank sailings at this time of year due to lower exports during the Chinese New Year (CNY) holiday. Carriers initially opted to keep CNY sailings largely intact in order to clear the export pileup at Chinese ports. But the congestion in Los Angeles and Long Beach is leaving carriers short of ships. That means the pileup in Asia will take even longer to clear.

(eeSea) data as of Wednesday reveals an 11% dip in Asia-U.S. sailings in February versus January. This is despite continued high cargo demand.

Seaintelligence Consulting CEO Lars Jensen explained, “When you have all the vessels stuck waiting outside ports, they cannot make the return journey so they cannot start the sailing they were supposed to do. The blank sailings now are not a choice. They are an operational necessity.”

No letup in San Pedro Bay traffic jam

At any given time since the beginning of this year, there have been around 30 container ships stuck waiting at anchorages in San Pedro Bay offshore of the ports of Los Angeles and Long Beach.

The situation has not improved at all. According to the Marine Exchange of Southern California, there were 33 container ships at anchorages and 26 at berths on Wednesday. Including all ship types, there were 55 vessels at anchorages — a new record, with all Los Angeles/Long Beach anchorages full and all contingency anchorages off Huntington also full.

On Monday, many of those vessels had to leave anchorage and go to sea due to extreme storm conditions. Winds gusted to 55 mph and swells reached 15 feet. Marine Exchange Executive Director Kip Louttit exclaimed that he “could not recall a more complex situation with this many vessels and this bad a wind and sea condition for such a sustained period of time.”

Port congestion is being caused by high inbound volumes combined with surging COVID cases among dockworkers. A spokesperson for the ILWU dockworkers union told American Shipper that number of its members testing positive had risen to 803 as of Monday, up 16% from 694 as of Jan. 17.

“They can’t service the ships fast enough, which has led to waiting times of 10-14 days or even more, depending on the terminal,” said Nerijus Poskus, global head of ocean freight. “As of last week, there were almost 300,000 TEUs [twenty-foot equivalent units] waiting to get offloaded,” Poskus added.
Jensen put it another way. “It is the equivalent of pulling five full trans-Pacific services out of action as long as you have these waiting times,” he said. “The impact is massive.”

Deteriorating reliability, rising rolls

As previously reported by American Shipper, global schedule reliability has collapsed to around 50% versus normal levels of 70%-80%. Getting a box delivered on time is no better than a coin toss. In reality, the chance is much worse. Schedule reliability data doesn’t take into account blank sailings. Nor does it take into account cargo that is “rolled” — pushed off to a subsequent voyage.

Data on cargo rolls by the world’s top liners at the world’s top ports is compiled by Ocean Insights. According to Ocean Insights data released last week, the share of shipments that did not sail aboard their originally scheduled vessels rose to 37% in December. That’s up sharply from 29% in July and 25% in December 2019.

One importer moving goods from China via Los Angeles wrote to American Shipper: “We’re seeing over 60 days of additional transit time now. The entire process used to take 28 days. Now containers shipped in November have still not reached their final destination.”

Add it all up and U.S. consumers should see escalating shortages of goods on the shelves. That, in turn, should fuel import demand even further into 2021.

Light at the end of the tunnel?

One of the central drivers of today’s capacity crunch is a shortfall of containers. Or rather, a shortfall of containers positioned in the right place.

But there are some glimmers of hope. Data on container-equipment availability is tracked by the Container x-Change Container Availability Index. Availability of 40-foot high cubes (40HCs) remains extremely low. But availability of 20-foot dry cargo (20DC) and 40-foot standard dry cargo (40DC) units improved markedly this month.

An index level below 0.5 is considered a shortage. In the third week of January, the index in Shanghai for 20DCs was up to 0.34 and for 40DCs to 0.37. The index for 40HCs was still a very low 0.11.

Getting back to normal

Jensen expressed confidence that the container-equipment challenge will be resolved fairly soon. Chinese factories have been busy churning out new boxes.

“What’s happening now is exactly the same scenario we saw in 2010 after the financial crisis. If you look at 2010, they went on a building spree. It took about three months from when the problem arose to when it was resolved. If we put that in the context we have now, this should be resolved by Chinese New Year.

“The wild card this time around is the port congestion because that ties up a significant part of the ability to reposition the empty containers back into balance. That could delay things somewhat,” acknowledged Jensen.

As more containers are manufactured, liners should simultaneously work to get sailings back on schedule. “It appears the carriers plan to use the post-Chinese New Year period to get their vessels back on schedule,” said Jensen. “If that works out and if we get the port congestion sorted out — which is a big if — we could get back to normal levels [of service reliability] within a few months. But that’s the optimistic view.”

TOP