The transpacific is enjoying record volumes and freight rates – but congestion and capacity constraints are forecast for later this year, reports Rivera.
Soaring Freight rates
Strong volumes can be seen in Container Trades Statistics’ (CTS) figures, which show the Far East to North America leg. Volumes reached 23.70M TEU in 2021 – and this year kicked off to a good start, with January’s volume of 1.92M just eclipsing the 1.91M TEU achieved in the same month last year.
On the other trade leg, CTS data shows volumes reached 6.37M last year, but for the first month of this year, volumes were down year-on-year. January’s volume of 445,000 TEU dropped from 555,000 TEU achieved in the same month last year.
Freight rates have reached record highs on the trade, with CTS’ aggregated price index showing the January 2021 rate of 141 soared to 272 in December 2021 for the main trade leg. And this year was off to a strong start with an aggregated price of 286.
Aggregated prices in North America to the Far East rose from 64 in January 2021 to 93 in December 2021, hitting 97 in January this year.
China lockdowns creating pressure
The booming volumes are putting pressure on the supply chain, as are factory lockdowns in China, part of the country’s zero-Covid strategy.
xChange analysis highlights the impact of this, “Historically, this time of the year is crucial for most companies as they begin to ship fresh production in preparation for the early peak season. Lockdowns in China will not just be a production slowdown, but also a slowdown of cargo movement, both being detrimental to the supply chain. While the ports in the United States will not feel the pinch before three to five weeks, until the backlog improves.”
Another challenge to face this year, which could add to congestion woes on the US west coast, is contract negotiations between the longshoremen’s union and the west coast ports, which is set to expire on 1 July 2022.
xChange says, “Going by the analogy that the containers from China (hopefully) will make their way to the US ports around the same time in July-August (delayed by the China lockdowns), they will be bound to face worsened congestion at the US west coast ports as well as east coast ports, which are already struggling to handle the traffic.”
Container xChange co-founder and chief executive Dr Johannes Schlingmeier warns, “In the coming months, the transpacific route will witness a major congestion, and shippers must think ahead and prepare for the worst as port congestion worsens, freight rates shoot up and capacity deteriorates.
“Lockdowns in China will further reduce capacity and cause a surge in already inflated shipping prices. The shockwaves will be felt across the US, and almost everywhere in the world.”
Port perspectives
The port of Long Beach has experienced its busiest February on record – a sign the transpacific trade lane is booming.
In an interview with CST, Port of Long Beach (POLB) executive director Mario Cordero says, “We have seen some improvement since Q3 last year. No major container gateway was immune from supply chain disruption. There were 109 vessels waiting to get into the port complex [LA and POLB combined] in January, and this has now dropped to 43.
“It is an improvement, but we are not out of the woods yet. American consumer demand remains very high. Ask any major carriers where the market is, and they will say USA because of consumer demand.”
But he points out the cargo is moving in a “more fluent manner”. At the end of last year, there were capacity constraints due to laden containers in the port for nine days or more; since then, POLB has made “vast improvements” in terms of loaded imports at terminals.
Indeed, because of the progress made in this area, the planned container dwell fee is now on hold. Mr Cordero explains, “It is on hold because of the progress we have made. I appreciate the efforts of international carriers who collaborated with us at a very high level.”
Compared with 1 November last year, there has been a 50% reduction in dwell time for laden import containers.
The port’s busiest February on record saw TEU volumes jump by 3% compared with the same month last year. Commenting on why, Mr Cordero says, “We have a great economy in the US, and there has been a growth in ecommerce. In 2020 it grew 32% and then in 2021 grew an additional 14%, so that is a big factor.
Amazon state of mind
“A couple of years ago, I said we needed an “Amazon state of mind”. When I said that, at least in the US, Amazon changed everything: you order goods in the evening and expect them on your porch the next day. Ports must be responsive to that new model and the expectations of the consumer and American business enterprises.”
Mr Cordero says this has been embraced as a project and is a work in progress. “I will be honest, are we 24/7 seven days a week? Not yet, but we have made good inroads with expanded gates.”
Pier T has also begun its pilot programme for 24-hour truck cargo pick up and this year CMA CGM announced a 24/7 pilot project at Fenix Marine Services terminal at LA.
Mr Cordero sums up, “It’s more than just a vision, now there are efforts to expand operating hours.”
POLB also lunched its Supply Chain Information Highway in February.
Mr Cordero comments, “We are very excited about the potential of this integrated approach. There has been a lot of movement in digital transformation in the international supply chain industry and everybody has their own specific technology, from carriers to terminals and shippers. We decided to partner with an entity who formulated an integrated system approach where we are not promoting a particular portal or platform. After much discussion, we felt an integrated system was the best choice. You put in your data and can obtain data at no cost for you.”
Three ports have already joined POLB: Oakland, Tacoma and Seattle.
POLB reached a milestone in September last year with the completion of Long Beach Container Terminal. Additional capacity of 1M containers has been added with its completion. Its intermodal yard can now move 1.5M containers by on-dock rail.
Mr Cordero says, “At full capacity the terminal is 3.5M TEU and 1.5M of that number can go by on dock rail, so it increases velocity.”
The ports of Seattle and Tacoma have also been doing their best to battle congestion. In March, US Agriculture Secretary Tom Vilsack announced plans for prepositioning containers of agricultural goods near port terminals to help improve service for shippers of US-grown agricultural commodities.
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Source: Rivera
