No relief in sight for global supply chain congestion, say experts

No supply relief in sight

The weather is getting brighter, but the outlook for containerized goods arrival times is not.

Earlier this year, Shifl, a New York-based freight-forwarding company, reported that the average transit times for container ships on the transpacific trade loop had jumped 96 per cent in December 2021 compared with May 2021.

Transit data measures the time it takes for a container to leave its port of origin until it is unloaded at its destination terminal.

That time hit around 45 days for a container to get from the ports of Shanghai, Shenzhen, Hong Kong or Tianjin and to be unloaded in Los Angeles-Long Beach in California. That is 181 per cent higher than the average pre-pandemic transit time of 16 days.

But container transit delays are not unique to California ports.

Transit time delays to the ports of Vancouver and Prince Rupert hit anywhere between nine and 12 days during the same period in 2021. Added to the normal container transit time of between 16 and 23 days to B.C.’s two main ports from the same Chinese ports, a container took between 28 and 35 days to get to its destination via B.C.’s West Coast.

But what about 2022, shippers might ask?

Answers from analysts do not provide much light on the horizon for supply chain congestion relief.

Simon Heaney, senior manager of container research at Drewry, characterized the current global container shipping market as “crazy.”

That is an apt description for a market in which the global outlook for port cargo handling is forecast to drop but container shipping rates and maritime carrier profits are predicted to increase substantially.

During Drewry’s most recent outlook for the global container market, Heaney pointed out that high rates for containerized cargo will be dictated by supply chain bottlenecks, “which, sadly, remain highly unpredictable.”

Key 2022 contributors to that unpredictability are the Russian invasion of Ukraine and China’s zero-tolerance COVID-19 strategy that has disrupted cargo movement through such main ports as Shanghai and Shenzhen.

Drewry, a U.K.-based shipping consultancy, has therefore downgraded its 2022 baseline forecast for global port cargo handling to a 4.1 per cent increase from its previous forecast of 4.6 per cent.

Its forecast for 2023 has likewise been lowered to a 2.8 per cent increase from 3.5 per cent.

Meanwhile, the overall profit set to be reaped by the global container fleet in 2022 could be as high as US$300 billion. That would be on top of the US$214 billion profit generated by the sector in 2021.

Considering that the 2021 profit for ocean carriers was more than the US$109 billion they generated in all of the previous 20 years, the 2022 total is massive.

As Heaney pointed out, the COVID-19 pandemic has been good for ocean carrier profitability because it created capacity shortages “in nearly every link of the freight transportation network at a time of high demand.”

Drewry numbers show container cargo movement inefficiencies, disruptions and port congestion resulted in a 17 per cent container ship capacity shortfall in 2021 and a similar shortage in the number of container ship slots available to the market in 2022.

Heaney added that any new factory shutdowns in China could be bad news for ocean freight carriers because they would reduce demand for container services, but additional manufacturing interruptions might also provide some good news for shippers by correcting some of the capacity challenges they have been facing over the past two years.

Those challenges combined to drive containerized maritime freight rates up 110 per cent in 2021 and what is projected to be another 39 per cent this year.

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