Aerial view of containers and cargo ships at the Port of Los Angeles on January 19, 2022 in San Pedro, California.
Qian Weizhong | Visual China Group | Getty Images
Tens of billions of dollars in trade are either landlocked or anchored at sea in the US and Europe as ports become congested.
As of July 13, roughly 460,000 twenty-foot container equivalents (TEUs) were loaded onto ships waiting near East Coast ports, and 180,000 TEUs are near West Coast ports, according to MarineTraffic.
An important component of this picture is supply chain inflation and its impact on what consumers end up paying for goods.
According to MDS Transmodal, the nominal value of goods transported in a container has grown by nearly 9% in the years 2019-2021, measured at the global level. However, Antonella Teodoro, senior consultant at MDS Transmodal, explains that considering that the average annual growth in the previous two years was in the range of 0.7%, “there is reason to believe that the main reason for the forecasted increase in the last two years is the increase in freight prices.”
MDS Transmodal estimates that the total value of trade stuck on the water is approximately $30 billion.
Fears of a U.S. rail strike
A 30-day cooling-off period for the railroad labor law ended Monday, raising fears of a strike and prompting the Biden administration to issue an executive order Friday afternoon preventing an immediate rail union strike. On the same subject : Global food kilometers account for almost 20% of total food system emissions. Contract negotiations have been on and off since the contract expired in 2020.
The U.S. Importers Coalition has called on the Biden administration to create a President’s Emergency Board (PEB) to help the nation’s largest railroads and rail worker groups reach a contract agreement.
Biden on Friday formed an emergency council to investigate disputes between railroads and unions because they “threaten to substantially disrupt interstate commerce to the extent that would deprive a portion of the country of essential transportation service,” and to report to the president within 30 years. days.
The last U.S. rail strike in 1992 is said to have cost the U.S. economy $50 million a day, which would probably be more if a strike occurred today.
Logistics company Woodland Group says unions have left trains dangerously understaffed and overworked because of the gridlock, while the National Rail Labor Conference has offered a counter that includes retroactive benefits and significant pay rises.
California port pile-up
Meanwhile, the pile of containers bound for rail continues to pile up at the ports of Los Angeles and Long Beach.
The Port of Los Angeles told CNBC that a total of 19,665 rail containers have been waiting nine days or longer, while the Port of Long Beach reported a total of 13,819 rail containers on hold over the same period. This may interest you : United States Solicitor General obtains Prop 12 Infringement Interstate Commerce Clause. Over 60% of all containers waiting at these ports are destined for rail.
MDS Transmodal estimates that the approximate total value of trade in these containers is over $1.54 billion.
“Railway containers continue to pile up at ports in record numbers,” said Noel Hacegaba, deputy director of administration and operations for the Port of Long Beach. “We need those boxes moving to create more capacity and keep the economy moving.”
These long containers clog the land capacity of the port, hindering trade in the port. Port of Los Angeles has 90% land capacity. For effective land throughput, the optimal target is 70-75%. Due to the increase in the volume of containers, it takes more time to process ships.
German port labor battle
Wage negotiations between a German union and port employers reached another deadlock, resulting in a 48-hour strike from Thursday morning to Saturday morning. To see also : The report indicates that DSV has interests in acquiring C.H. Robinson’s Global Forwarding Business.
The court-ordered “peace commitment” may not mean any more strikes, apart from the current strike till August 24, sources said. Although the ruling only formally applies to the port of Hamburg, sources say that there are also no strikes in other locations during this time.
According to CNBC’s European supply chain heat map, trade has been disrupted.
Alex Charvalias, Head of Supply Chain Transit Visibility at MarineTraffic, said: “The deteriorating situation in Hamburg, where nearly 200,000 TEUs are waiting at the quayside, indicates that waiting times will increase in the coming weeks.”
Andreas Braun, product director for Europe, Middle East and Africa at Crane Worldwide Logistics, said the availability of empty containers affects cargo delivery.
“Containers are not readily available at terminals or inland depots,” Braun said. “The shipping lines are having extreme problems getting the discharges back to Asia. This is worsening the availability of discharges to be filled by exports in Asia,” he said.
Braun noted that this is all happening before the peak season on the Far East westbound trade route.
“European importers must expect delays in receiving their Christmas orders. European trade is also delayed for the US,” he said.
China trade
Due to growing port congestion in Europe and the United States, logistics managers are now closely monitoring the rate of canceled or canceled voyages reported by ocean carriers, which has fallen in recent weeks. Voyages are routinely canceled in an effort by shipping lines to make up time and restore schedule reliability. Another reason is lack of demand. Given the still high volume of containers moving out of China, the reason for the recent flight cancellations was the timing.
According to Sea-Intelligence, the reliability of ocean carrier schedules is about 36.4%.
Canceled voyages limit the availability of vessel space, which may increase freight rates. Right now, spot prices are lower than long-term contract rates, which hasn’t happened in years.
According to CNBC’s China Supply Chain Heat Map, vessel availability is not currently an issue.
While ship availability is strong, that could change in August if ocean liners decide to skip certain US ports to move trade more quickly.
Logistics executives tell CNBC they wouldn’t be surprised if that happens.
“As congestion increases on the East Coast, ports may be canceled,” said Alan Baer, CEO of OL USA.
This story has been updated to reflect an executive order issued Friday afternoon by the Biden administration regarding the labor dispute between the railroads and unions.
Data providers for the CNBC Supply Chain Heat Map are global freight booking platform Freightos, creator of the Freightos Baltic Dry Index; logistics provider OL USA; supply chain intelligence platform FreightWaves; supply chain platform Blume Global; third party logistics provider Orient Star Group; marine analytics company MarineTraffic; marine visibility data company Project44; marine transport data company MDS Transmodal UK; ocean and air freight benchmarking by analytics firm Xeneta; a leading provider of research and services; Analysis company Sea-Intelligence ApS; Crane Worldwide Logistics and air and freight logistics provider SEKO Logistics.
