2022 Provide Chain Outlook for U.S. Shippers

We could have seen a full shift in U.S. import patterns for 2022, significantly with a rise in cargo volumes by means of East Coast ports.

Invoice Mongelluzzo studies within the Journal of Commerce:

Import volumes within the first half of 2022 are anticipated to stabilize to the West Coast however proceed rising to the East Coast, in response to the weekly Sunday Highlight e-newsletter from Sea-Intelligence Maritime Evaluation.

Not Just for the First Half of 2022

I see the potential for West Coast delivery volumes to degree out and East Coast volumes to draw what would usually be West Coast cargo motion by means of the second half of 2022 as properly.

Port congestion has been a serious downside for properly over a yr, however it has been particularly dangerous at West Coast ports, with the Ports of Los Angeles and Lengthy Seaside serving because the poster youngsters for provide chain bottlenecks. Naturally, this may result in diverting some imports to East Coast ports (as has been taking place for months). However that’s not the one factor that would affect 2022 delivery habits for U.S. importers and exporters.

Since August of final yr, I’ve put warnings on this weblog to shippers that there may very well be disruptive contract negotiations at West Coast Ports this yr. In reality, that’s seemingly. The Worldwide Longshore & Warehouse Union (ILWU) grasp contract expires this yr, and talks for a brand new one are anticipated to get contentious over the problem of automation.

Avoiding ILWU Congestion Makes Second Half of 2022 East Coast Cargo Shift Possible

One of many high methods shippers can shield their provide chains from seemingly ILWU strife-driven port congestion is to discover delivery by means of East Coast ports. For that cause, a continued pattern by means of the top of the yr of exceptionally robust East Coast efficiency and leveling off West Coast quantity, as is predicted for the primary half of 2022, is probably going. If issues appear like they’re getting actually dangerous between the ILWU and Pacific Maritime Affiliation (PMA), West Coast ports might see an actual dip in quantity whereas East Coast ports reap the advantages.

Inflation May Influence Quantity

It must be famous that it’s by no means inconceivable that total import quantity to the U.S. may very well be negatively impacted by the seemingly occasion that inflation continues to soar by means of 2022. Clearly, that might affect cargo quantity at West, East, and Gulf Coast ports.

For a yr and a half, delivery demand soared unnaturally due to authorities insurance policies within the U.S. of lockdowns, COVID restrictions, and stimulus packages. This hovering demand clearly performed a big position within the port congestion and provide chain bottlenecks and disruptions the U.S. has been scuffling with. These coverage choices, particularly the trillions upon trillions in authorities spending (and money-printing spree that got here with it) are additionally monumental elements in why we’re experiencing greater inflation than has been seen in 40 years.

There’s no cause to consider these presently in energy in Washington will have the ability to repair the inflation downside anytime quickly. Particularly when it’s their insurance policies which were making inflation worse. Established spending patterns can prop up delivery demand, however it’s arduous to consider inflation gained’t finally damage total delivery quantity. If inflation is reigned in over the course of 2022, there may very well be a dramatic shift in delivery demand on the best way.

Regardless of Deceptive Enchancment, Port Congestion Nonetheless a Large Downside at West Coast Ports

Even with hovering inflation, we’re a good distance from seeing actual congestion aid on the ports. Due to the Chinese language New Yr that got here this yr on February 1st, we did see a major drop within the variety of ships ready to dock on the Ports of Los Angeles and Lengthy Seaside. Throughout the Lunar New Yr celebrations in China, factories shut down for a few weeks, which at all times leads to a decreased variety of ships and imports hitting U.S. West Coast ports. Nevertheless, there may be nonetheless an extremely massive queue of ships ready to dock.

Greg Miller reported in American Shipper that there have been 66 container ships ready yesterday for berths on the sister ports of Los Angeles and Lengthy Seaside. Sure, that’s an extremely excessive variety of ships. Nevertheless, it’s an infinite enchancment within the bottleneck of ships we’ve been seeing there. In January, Miller reported, there was a mean of 102 ready offshore per day. 66 container ships ready to dock out of the blue feels like a fantastic quantity when in comparison with final month’s common and the all-time excessive of 109 that Miller reported occurred on January ninth.

The Ports of Los Angeles and Lengthy Seaside have to make the most of the decreased numbers of ships and cargo as a lot as they’ll proper now as a result of these numbers are, after all, anticipated to surge once more within the very close to future. Miller studies:

The information reveals that weekly scheduled departures plunged to 22% beneath the typical in the course of the week of Jan. 17 and to 30% beneath common within the week of Jan. 24. Given the trans-Pacific transit time, this may lower the queue in February.

The Sea-Intelligence numbers reveal that the scheduled departures haven’t solely rebounded since then however are about to shoot a lot greater. Scheduled departures are up round 16% in February in comparison with the 2017-19 common. Within the third week of March by means of the top of April, departures will likely be up 40% or extra versus pre-COVID ranges.

Sadly, that information doesn’t bode properly for port congestion restoration on the Ports of Los Angeles and Lengthy Seaside within the upcoming months. At that time, we’ll be getting dangerously near the ILWU contract expiration after which the summer season to fall worldwide delivery peak season.

East & Gulf Coast Ports Not Proof against Congestion

In the meantime, the diversion of cargo from the West Coast to East and Gulf Coast ports is having a toll that can seemingly solely worsen as 2022 continues. Miller writes:

In response to [Sea-Intelligence CEO Alan Murphy], “What’s alarming is that there’s a 60% enhance within the variety of vessels on the Asia-North America East Coast commerce lane within the coming months, as carriers attempt to circumnavigate port congestion on the West Coast. This can severely enhance strain on the port infrastructure on the East Coast.”

That strain is already excessive, significantly in Charleston. On Wednesday, there have been 31 container ships anchored offshore, in response to ship-positioning information from MarineTraffic. Project44 information reveals that common container dwell time in Charleston this week is up 37% yr on yr.

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Different East and Gulf Coast ports are seeing ship queues lengthen, as properly. On Wednesday, there have been 13 container ships anchored or loitering off New York/New Jersey, the place Hapag-Lloyd stated “excessive berth and terminal utilization are anticipated to proceed into the second quarter.” There have been one other 13 container ships off Virginia, 12 off Houston and one off Cell, Alabama, in response to MarineTraffic information. 

Add all of it up and there are 70 ships ready to get into East/Gulf Coast ports, 4 greater than there are ready to get into Los Angeles/Lengthy Seaside. Over on the West Coast, add in one other 10 ships ready for berths in Oakland and another off Seattle/Tacoma, and the grand complete for the nation’s ports rises to 147 — the identical countrywide degree as in early January, when the LA/LB queue was at its historic peak.

Port of Charleston Implements Quick Export Embargo Due to Congestion

Due to how congested the Port of Charleston is, it’s not accepting export cargo at its Wando Welch Terminal this morning or tomorrow morning. Ari Ashe studies within the JOC:

The Port of Charleston won’t settle for loaded exports in the course of the mornings this Thursday and Friday at its Wando Welch Terminal as a result of the port is working critically low on house amid a deluge of import containers that cargo house owners are failing to choose up in a well timed vogue.

The embargo on export hundreds will run from 5:00 a.m. to midday on Thursday and Friday, the South Carolina Ports Authority (SC Ports) stated in a press release late Wednesday. Empty containers and temperature-controlled hundreds will likely be accepted, however the port authority will flip away drivers with export hundreds in customary dry containers.

Sadly, on the subject of worldwide delivery, U.S. exporters usually get the quick finish of the stick when evaluating them to their importing compatriots (who haven’t precisely had issues simple because the pandemic hit). It’s the surge in imports that’s actually inflicting congestion that’s affecting exporters’ means to ship exports to the port proper now.

Whereas much less publicized and visual, it is going to be fascinating to see how a lot East and Gulf Coast congestion tales like this affect the shifting of cargo away from congested West Coast ports in 2022. What’s clear is it is going to be some time earlier than the mess of the U.S. provide chain is cleaned up.