Pandemic be damned, we all have to eat and foodstuffs have to move. Keeping that in mind provides a slice of hope for transporters of food-related products who are hungry for good economic news.
“We are focused on the refrigerated market, so that market is a little bit more resilient to some of these shocks compared to others. Foodstuffs are still moving. We still see a pretty good demand in the pipeline,” said Greg Tuthill, chief commercial officer for SeaCube Container Leasing.
SeaCube, headquartered in Woodcliff Lake, New Jersey, is the world’s third-largest lessor of refrigerated containers — reefers — and fifth-largest lessor of dry containers. Tuthill, who joined SeaCube in July 2018, previously was the senior vice president and chief operating officer for CMA CGM America. His more than 30 years of industry experience includes stints with American President Lines, APL, NYK Line and TOTE Logistics, and earlier this year he was elected to a three-year term on the Containerization & Intermodal Institute’s board of directors.
Giving Tuthill indigestion are the bottlenecks in the supply chain hampering the delivery of all types of goods to their final destinations.
“It started with not rebounding post-Chinese Lunar New Year because of the China coronavirus issues,” Tuthill said. “That created a front-end cargo situation where no cargo was moving, they had congestion at the ports, they had run out of reefer plugs at the ports so there was displacement of cargo. There was an imbalance of containers and all of that imbalance then basically created some congestion.
“The idea that everyone had was there was going to be a resurgence in cargo once China got back on their feet and that would be the snapback that would create the recovery. But as soon as China recovered, then Europe had some pretty significant issues with their supply chain and then, obviously, the U.S. and now that has cascaded down to Southeast Asia and then into India. So where the recovery was expected and tied to what we thought would be trying to get back to a normal cycle, now it’s transcended into other markets, where now there’s congestion and bottlenecks in other areas,” he said.
Tuthill said cargo congestion already has hit U.S. West Coast ports.
“I think there are going to be problems trying to get cargo through the U.S. It’s already started because the West Coast is running into cargo flows that aren’t moving. There is cargo buildup on the West Coast and basically there are space constraints at the terminals. No one is accepting that freight because there’s no place to put it and there’s no consumption so therefore everything’s backed up at the port level,” he said.
By the time the worst of the coronavirus crisis had passed in China and cargo started to move again to the United States, American retailers were shuttering as COVID-19 spread.
“As soon as cargo arrived in the U.S., most stores on the retail side were closed, so that cargo flow then got halted because there’s nowhere to put it,” Tuthill said.
“Those container dwell times will extend. There again we’ll have an imbalance with a lot of containers on the West Coast that aren’t moving inland or aren’t moving to the warehouses. I think a lot of the terminals are being asked about storage capability and alternatives. That’s happening on the East Coast and the West Coast. The supply chain basically has stopped for the U.S. at the port level and hasn’t flowed through, and that’s because the stores have closed and we’re now into a lockdown mode,” Tuthill said.
In a conference call earlier this week, John Wolfe, Northwest Seaport Alliance chief executive officer, confirmed there were port congestion issues in Seattle and Tacoma, Washington, driven in particular by imported vehicles that have nowhere to go as auto sales have tanked during the coronavirus crisis and cars aren’t moving off dealers’ lots.
“When the import autos are coming into our gateway, they’re being held for a longer period of time in and around our terminals,” Wolfe said. “We’re being asked by the auto importers to store more vehicles in close proximity to the port because the dealerships are not accepting as many vehicles at this time.”
But vehicles aren’t the only imports wrecking supply chain flows, Wolfe said.
“With many of the retail stores closing temporarily, it’s causing a challenge in the supply chain because the retailers are starting to push back on receiving additional cargo volumes,” he said. “We are working closely with the ports and the terminal operators and looking at underutilized terminal facilities where we can help to store cargo in the event that cargo gets hung up at the port because retailers aren’t able to take that volume.”
Wolfe said there also are challenges on the export side.
“The biggest challenge that the exporters have is securing equipment,” he said. “If the imports aren’t being unloaded, it’s not making that equipment available for the exporters. The supply chain is very integrated, both inbound and outbound. Any kind of disruption in the global supply chain has a net effect on the overall movement of goods.”
How long it takes to clear the U.S. supply chain bottleneck may depend on how quickly the nation recovers from the COVID-19 pandemic, according to Tuthill.
“If there’s no demand, it could take awhile because then there will be excess inventory that has not been moving,” he said. “I think it’s probably worth noting that inbound orders are now being canceled or deferred or delayed. Most importers are looking at a very slow recovery; therefore what they had in the pipeline is either being reduced or canceled. The numbers vary, but it’s somewhere between 10 and 15% of the inbound [purchase orders] have been canceled or either deferred or delayed. That’s a pretty significant impact.”
That impact could be felt a long time, Tuthill said.
“There are some stats on the forward-looking forecast for inbound cargo. That varies too depending on what you read, but there’s somewhere between an 8 to 12% reduction in volume this year, maybe even higher depending on what area you’re talking about. That could have a pretty big impact on trade volume,” he said.
“I think everyone is pretty cautious on their views for a recovery,” Tuthill continued. “I think a lot of people were thinking that after China recovered, things would get back to normal and here we are 30 to 45 days later and we’re seeing this spread take place that’s having a significant impact on the global trade networks.
Tuthill said reefer shipments of foodstuffs may be the exception.
“People still think there’s movement that will be taking place without too much downside because food continues to be of high demand. Those particular networks seem to be still intact. That’s the good news.”
And it’s good for SeaCube to fill ocean carriers’ needs for reefers.
“The lines, our customers, see the refrigerated market as probably the most favorable market based on the resiliency of that market that’s not tied to some of these other disruptions,” Tuthill said.