American ShipperContainerMaritimeNewsShipping

DSC chat: Monroe sees supply chain squeeze ‘through most of 2022’

‘We’ve got a new normal that we haven’t understood and still don’t understand’

This fireside chat recap is from FreightWaves’ Domestic Supply Chain Summit.

TOPIC: How maritime is impacting the domestic supply chain

DETAILS: What’s happening at the ports is reverberating inland. How should shippers manage their supply chains to minimize fallout, given that port pressures should extend well into next year?

SPEAKERS: Jon Monroe, founder, Jon Monroe Consulting, and Greg Miller, senior editor, FreightWaves and American Shipper

BIO: Monroe is a veteran of the container shipping business. He came out of the carrier side and set up Jon Monroe Consulting in 1998, focusing on the Asia-U.S. business and working with shippers, freight forwarders and NVOCCs. He currently represents two China-based companies: a large NVOCC and an ocean carrier. 

KEY QUOTES FROM MONROE:

“The delays are quite heavy, quite large, quite long. The terminal space is really the big issue and when a vessel comes in, it’s not only looking at finding a berth, it’s also looking at the labor. With basically 100 vessels out there, we’ve got 12 terminals that can accommodate approximately 28 vessels, and with the yard space — which is basically totally congested — when a vessel discharges, depending upon the terminal, somewhere between 20% and 80% of those containers move into closed lanes until they can find space to move them to where they can be picked up. You have empty containers competing with full loads for terminal space and a terminal slows down — its productivity, its movements, its picks in terms of unloading the vessel. When you look at the waiting time, it can be one to two to three weeks waiting for a berth, and then once you get a berth, if you have a large vessel that used to be worked in four to five days, it probably takes eight to 12 days — so you’re really extending that supply chain time.” 

“It has really become as bad as it’s ever been. In spite of the fact that a lot of the people are becoming more optimistic about it, I would say this is going to last for quite some time.”

“In 2021, we’ve had everything that could go wrong go wrong, from the Ever Given to China’s zero-tolerance policy with COVID and what happened with the shutdown in Yantian, to the buildup in Southern California and congestion moving to other places like Savannah as well as inland to the railroads. It doesn’t matter who you are or where you are; you’ve experienced a lot of pain on this supply chain. And I would say in the fourth quarter of 2021, every CEO and CFO in North America woke up to the fact that their product was six to eight weeks late and it was costing them five to six times as much [to transport]. And that’s where we stand today. We’ve got a new normal that we haven’t understood and still don’t understand because we don’t know when it’s going to end, and everything I see in China and elsewhere leads me to believe that this is definitely going to take place through most of 2022.”

[On the ports’ plan to charge an escalating fee on long-dwelling containers] “You have two issues. One is that, yes, we did get a decrease of long-dwelling containers, but as you can see, there are almost 100 vessels backed up and that means more containers coming in that will become long-dwelling containers. But I think the real issue here is: How are you going to manage such a charge? When a vessel is discharged, those containers can be put in a closed lane — and when I say closed lane that means those containers are sitting in an area where they’re unavailable to be picked up — and very often those containers might sit in a closed lane for as long as two to three weeks. Let’s say you have a container that’s sitting in a closed lane for three weeks and they want to charge for anything that’s dwelling longer than nine days. Then you’ve got two other issues. One is you can’t measure it. I don’t see any way of measuring it and saying, ‘OK, we can discount this container until it is actually in a place where it can be picked up. But the biggest issue is: Imagine that container is charged $100 the first day, $200 the second day [etc.]. All that will do is create an opportunity for a lot of companies to just abandon their containers because the cost of it sitting where it couldn’t be picked up is greater than the value of those goods. It’s really a dangerous proposition.”

Click for more articles by Greg Miller 

Greg Miller

Greg Miller covers maritime for FreightWaves and American Shipper. After graduating Cornell University, he fled upstate New York's harsh winters for the island of St. Thomas, where he rose to editor-in-chief of the Virgin Islands Business Journal. In the aftermath of Hurricane Marilyn, he moved to New York City, where he served as senior editor of Cruise Industry News. He then spent 15 years at the shipping magazine Fairplay in various senior roles, including managing editor. He currently resides in Manhattan with his wife and two Shih Tzus.