American ShipperNews

Viewpoint: Bigger mallet needed for latest game of whack-a-mole

Maritime trade problems keep popping up in China, Europe and US

Logistics managers and U.S. shippers can’t seem to catch a break. High temps in China and labor negotiations in Europe are squeezing the supply chain vise harder and containers are piling up.

Record heat is forcing some manufacturers in 19 cities and jurisdictions in China to shut down production for six days because of government-planned power cuts. Seko Logistics told American Shipper that factories in Sichuan were asked to suspend production for six days, from this past Sunday through this coming Saturday, due to high temperatures as the province worked to ensure electricity supply to households.

In an email to import clients, Worldwide Logistics said the “orderly” power cuts are making the logistical situation more challenging.

That ongoing challenge is the COVID testing on truck drivers, which is slowing down the movement of raw materials and exports. The testing has dragged out the timeline of goods movement from days to weeks, according to Seko’s Akhil Nair. The CNBC Supply Chain Heat Map for China has been a consistent yellow of congestion for trucking.

Source: CNBC Supply Chain Heat Map

Another Seko Logistics official explained, “Heavy-industry enterprises, such as those that produce aluminum and copper, are the most impacted. Some office buildings and shopping malls in Shanghai were also affected. Since Aug. 6, Zhejiang Province has started C-level 12.5 million kilowatts of power limitation measures. Some factories in Ningbo, Wenzhou, Yiwu and Quzhou are required to work for only three days in a week. Factories in Anhui, Changzhou, Nanjing and Nantong of Jiangsu Province are also influenced.” 

The areas of the power disruption include Chengdu, where one of Foxconn’s factories for Apple watches and computers are manufactured. Solar cell companies are also reported to be impacted by this energy curb. Sichuan is the home of substantial lithium producers. Intel also has manufacturing in Sichuan. CATL, the lithium battery supplier for Tesla, is another manufacturer impacted. Sichuan is home to some large lithium producers. Intel also has manufacturing in Sichuan.

According to Seko, Shanghai is also reporting some manufacturing power disruptions. These interruptions will not be helpful with Golden Week approaching, as manufacturing will be cut back and vessel capacity will tighten.

“Based on the latest issue of Sea-Intelligence’s Blank Sailings Tracker, the number of blanked (canceled) sailings on major U.S. import trades remains constant, and the outlook for the coming 10-12 weeks is very close to being back to ‘normal,’” wrote Niels Madsen, vice president of product and operations at Sea-Intelligence ApS. “It should, however, be noted that carriers have not yet incorporated (hopefully) planned blanked sailings in connection with upcoming Golden Week ex-China, so it is expected that the number of blanked sailings on trades ex-Asia will increase in weeks 40-42.”

No labor concession

Meanwhile, across the pond, the container congestion is growing at the German ports as the union and ports go back and forth in their 10th round of discussions.

Crane Worldwide Logistics is warning clients that if no agreement comes by the latest deadline of Monday the backlog of import containers bound for the U.S. will spill over well into the first quarter of 2023.

“If no compromise will be made, we can expect further strikes, which will, even more, worsen the already stressed situation in the northern ports,” said Andreas Braun, Europe, Middle East and Africa ocean product director for Crane Worldwide Logistics. “Congestion, vessel schedule and intermodal operations are already a mess and further strikes will just contribute to it. We will not see a change back to a normal situation before Q1 2023.”

Delays associated with these labor strikes and slowdowns are evident in SONAR’s Ocean TEU transit time chart.

SONAR: Ocean TEU Transit Times. To learn more about FreightWaves SONAR, click here.

Containers in rail yards and the ports are gathering dust based on the CNBC Europe Supply Chain Heat Map.

Source: CNBC Supply Chain Heat Map

Unfortunately, the strike wave is expanding in Europe and that will only compound this logistical logjam.

Beginning on Sunday, 1,900 dockworkers at the Port of Felixstowe, the U.K.’s largest container port, will strike for eight days. Approximately 40% of all containers for the United Kingdom are processed at Felixstowe.

Reviewing the bills of lading using ImportGenius from July 1 through last Friday, numerous containers filled with Guinness beer and whiskey for Diageo, breakfast cereals for Kellogg, medical devices, pork shoulders for Pilgrim’s, flooring, tires for Pirelli Tires, and Ben’s Rice for Mars Food.

“If the strike does proceed, there will be significant disruption to supply chains throughout the United Kingdom,” Braun said. “Vessels will see delayed berthing windows [and] congestion at the terminals but also in the hinterland depots will increase. Subsequently, shippers and consignees will face massive delays in getting their transportation executed. The one-week strike will take at least two to three months to recover.” 

Unfortunately, “recovery” in maritime is excruciatingly slow. An example is the Port of Oakland in California.

Source: CNBC Supply Chain Heat Map

“The Port of Oakland’s marine terminals are still clearing out the backlog as a result of the trucking protests which shut down the port for a week a month ago,” said Bryan Brandes, the port’s maritime director. “Import dwell still remains a critical issue at the port and we need the imports moved off to allow the lines to restore the services to better service our exporters and importers.”

According to project44 and Blume Global, the port has the longest dwell time for import containers. Piled at the ports right now are containers filled with empty wooden barrels for Robert Mondavi wine, auto parts, Melissa & Doug puzzles, Italian furniture and wine, and flooring.

On the East Coast, we are beginning to see a pullback in bookings, as reported earlier by American Shipper.

“We’re seeing an 18.5% drop, from 70 down to 57 vessels waiting for berths at East Coast ports,” said Joshua Brazil, VP of supply chain insights at project44. “The queue, especially at 

[the Port of New York and New Jersey] has improved from 15 vessels to nine vessels over the course of the week. Thirty vessels are still queued at Savannah and 23 are anchored at Houston. However, it’s too early to tell if this improvement is a long-term trend, especially as we head into peak season.”

We have learned during this pandemic to expect the unexpected. Just when you think you have this game of whack-a-mole figured out, a new ugly problem pops up.

The CNBC Supply Chain Heat Map data providers are Blume Global, Crane Worldwide Logistics, DHL Global Forwarding, Everstream Analytics, Freightos, FreightWaves, MarineTraffic, MDS Transmodal UK, OL USA, Orient Star Group, Planet, project44, Sea-Intelligence ApS, Seko Logistics and Xeneta.

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Lori Ann LaRocco

Lori Ann LaRocco is senior editor of guests for CNBC business news. She coordinates high profile interviews and special multi-million dollar on-location productions for all shows on the network. Her specialty is in politics, working with titans of industry. LaRocco is the author of: “Trade War: Containers Don’t Lie, Navigating the Bluster” (Marine Money Inc., 2019) “Dynasties of the Sea: The Untold Stories of the Postwar Shipping Pioneers” (Marine Money Inc., 2018), “Opportunity Knocking” (Agate Publishing, 2014), “Dynasties of the Sea: The Ships and Entrepreneurs Who Ushered in the Era of Free Trade” (Marine Money, 2012), and “Thriving in the New Economy: Lessons from Today’s Top Business Minds” (Wiley, 2010).