Market Update October 2021

As we enter the traditionally busy Q4 there is regrettably little indication that there will be a restoration in the market anytime soon.   Based on current spending habits and historically low inventory levels, the capacity crunch will continue to plague the transportation industry deep into 2022.   To compound the problems further, power cuts have caused factories in 10 Chinese provinces to reduce production or temporarily close.   At least 10 publicly listed companies have advised the Shanghai and Shenzhen stock exchanges that factory output had been impacted by government-imposed power cuts and their earnings could be negatively affected.   Provincial governments were directed to ration electricity consumption.   Affected provinces include Jiangsu, Guangdong and Zhejiang, which are among the most industrialized provinces in China.   Guangdong and Zhejiang are also home to China’s busiest ports, such as Guangzhou, Nansha, Yantian and Shekou. Jiangsu lies along the Yangtze River Delta and its container exports are usually processed by Shanghai and Ningbo.

Air Transport

The growing US air freight market is something to watch. With air freight transportation showing no signs of slowing, many carriers are looking for ways to increase their cargo capabilities. Chicago’s O’Hare International Airport along with Atlanta and Los Angeles all suffering from backlogs for tendering air export cargo as well as collecting air import cargo. Many airlines have opened up off-site facilities in the suburbs for collecting import freight thus alleviating the wait times at the dock. Cargo handler AGI (Alliance Ground International) announced a new airfreight facility near Newark Liberty International Airport which will feature 19 cargo bay doors with security and cold storage options. Additionally a number of the traditional Trans-Atlantic carriers have looked to re-introduce services postponed due to the Pandemic. British Airways have already re-launched a number lanes with Virgin Atlantic restarting service with Las Vegas, San Francisco and Orlando.

In China Shanghai Pudong (PVG) airport is still recovering from a backlog and increased volumes. This is of course resulting in heavy demand on capacity and increasing freight costs.

OCEAN TRANSPORT

The number of container ships at anchor or drifting off the ports of Los Angeles and Long Beach has exceeded the record numbers from last month. There were an all-time-high of containers ships waiting for the ports in September. Out of those, 23 had to drift because anchorages were full. Dwell time at Port of Los Angeles is now at +7 days. Thankfully the Ports of Long Beach and Los Angeles have increased operating hours for nights and weekends to help with the flow of goods.

While volume pours in from Asia, limitations on warehouses, trucking, and rail beyond the terminal are also contributing to the congestion, which is delaying imports into the U.S. Ships that are stuck at the Southern California ports waiting to unload means that the vessels will not make it back to Asia in time for their next trip so carriers will be cancelling voyages. Blanked sailings will not only be on the trans-Pacific lines but on a more global basis, as carriers pull other routes for more profitable ones (and higher spot rates).

Additional USA port congestion is felt in New York along with Savannah, Houston and Seattle with average delays of 5-12 days for vessels awaiting berth.

Ground Transport

Transportation capacity continues on a downward trajectory while prices are increasing. Price increases have are already being seen with surcharges for driver retention programs along with increased fuel surcharges. Pallet Networks are struggling with demand and previously reliable next day and 2 days services are unable to cope with demand. Truck Power at UK Ports has become increasingly challenging with London Gateway suffering with considerable deficit of available drivers.

The once reliable US Rail network is also struggling with demand with dwell times of 2 weeks at some ramps.

 

E-commerce

Inventory levels did increase for the country’s largest retailers for the fiscal second quarter. Still, many chains are at a supply deficit as compared to pre-pandemic levels. While some chains saw increases in stock levels during Q2, some are still seeing sales outpace inventory growth. As far as peak season goes, most retailers admit to some empty shelves in stores where they sold beyond expectations while addressing supply chain bottlenecks both domestically and internationally.

Elevated consumer demand and supply chain challenges suggest it could be a while before retailers can rebuild stockpiles so this freight cycle could go well into next year.

 

Please do not hesitate to speak with your local Horizon International office should you require move information or guidance on your international logistics needs.

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