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Viewpoint: It’s too soon to celebrate Shanghai reopening

Photo: Jim Allen/FreightWaves

Trade is a forward-looking indicator of the supply chain. The truth in the flow of containers disproves rhetoric and provides a reality check. The CNBC Supply Chain Heat Map for China is showing several hot spots slowing down the flow of trade this week.

No matter what corks are popping over Shanghai reopening, the party needs to wait. The city will not fully reopen until mid to late June. The decrease in completed manufactured goods is reflected in the spiral in exports leaving Shanghai bound for the United States. Bookings for containers bound for the U.S. from Shanghai are also still down. Until all intercity crossings and COVID testing measures are lifted, you will not see a full rebound.

Ocean TEU volume index from all ports to the United States
To learn more about FreightWaves SONAR, click here.

Abysmal performance

Ocean carriers are increasing their canceled — blank — sailings or skipping ports in an effort to make up time and get back on schedule, but it’s not improving service for global importers. According to Sea-Intelligence, vessels on average are seven days late. Niels Madsen, vice president of product and operations of Sea-Intelligence, said carriers need to provide a realistic transit timeline for customers. 

Shippers need to demand carriers to amend the current practice of quoting based on pro forma schedules and instead focus on providing cargo owners with realistic lead times for their planning,” he said.

As a result, logistics managers are left with a murky timeline. Crane Worldwide Logistics said it is now advising clients to build in three to four weeks of advance notice to request vessel space. The combination of delays created by the late vessel arrivals coupled with fewer containers being exported out of Shanghai is leading to a decrease in available containers for other countries to export their own goods and the bunching of vessels, creating congestion in other parts of the world.

Peter Sand, chief analyst at Xeneta, said the congestion contagion will shift as American importers seek ways around the West Coast labor negotiations.
“This has resulted in the U.S. East Coast ports moving record-high imports and congesting facilities. While spot prices are down, they are still historically high. Long-term contract rates have soared, up 150% up year on year,” Sand said.

Port of Hamburg feeling the heat

The Port of Hamburg can’t seem to catch a break. American Shipper previously reported the growing threat of a labor strike. Unfortunately, port productivity problems are also on the back end of the port — at the rails. The German port has warned that “limited train operations will persist until further notice.” Export trains will not be allowed for the time being due to the closure of full-entrance rail tracks, delays of trains departing from Hamburg, construction projects and limited track capacity.

The U.S. ports of New York/New Jersey, Charleston, South Carolina, and Norfolk, Virginia, receive the most European exports.

Bracing for containers 

Bethann Rooney, director for the Port of New York and New Jersey, told American Shipper it expects to experience a “hockey stick-style surge” beginning approximately six to eight weeks after the reopening in China.

“Import containers originating in China represent 29.6% of our total imports, which pales in comparison to the China market share in the combined ports of Los Angeles and Long Beach, where it is more than twice as much. Hence, the effect will not be as significant here as it will be on the West Coast. Nonetheless, if we are unable to reduce the amount of long-dwelling imports and empties in the next several weeks, the surge will be very difficult to handle.” 

All East Coast ports are seeing an increase in container volume and vessel arrivals.  MarineTraffic is capturing the growing traffic off the Port of Savannah.

“Savannah is witnessing significant congestion,” explained Alex Charvalias, the supply chain in-transit visibility lead at MarineTraffic. “The situation is worsening. Shippers can expect the turnaround days to reach even 10 days.”

To put into perspective, Charvalias explained vessels that left the port last week had a turnaround time of almost six days compared to 2.5 days the previous week.

The surge in containers comes at a pivotal time for the West Coast ports. Labor negotiations between the Pacific Maritime Association and the International Longshore and Warehouse Union are reportedly resuming after a break. According to the Supply Chain Heat Map, the main West Coast ports are currently facing challenges in moving out containers as swiftly as possible.

One of the biggest challenges for the West Coast continues to be rails and warehouses. Based on the flow of containers, Blume Global CEO Pervinder Johar explained the import container dwell time at the Port of Tacoma, Washington, is due to a host of factors.

“There is both a shortage of railcars and a transload capacity limitation in the Pacific Northwest,” Johar said. “This issue has been developing since at least the third quarter of last year, when ocean carriers began to reduce vessel allocation for inbound cargo volumes, opting to increase port-to-port volumes to drive the velocity of empty returns to Asia to support the trans-Pacific eastbound route. When cargo owners recognized the carriers’ shift in focus, they shifted to a more local/transload-heavy model for their inland destined cargo. Rail operators, in turn, allocated fewer resources.”

This tale of the rails can be clearly tracked with FreightWaves SONAR.

Outbound loaded international rail container volume (Green) compared to Outbound loaded domestic volumes (Blue) in Seattle, WA
To learn more about FreightWaves SONAR, click here.

Container volume outbound from Seattle (blue line) is down one-third from year-ago levels. Meanwhile, domestic intermodal volume (53-foot containers – green line) is down only 2% from this time last year.

“We continue to see evidence of higher levels of transloading of imported goods from international containers to domestic containers to support the faster repositioning of empty oceangoing containers,” said Mike Baudendistel, head of intermodal solutions for FreightWaves. “Year to date through the end of May, U.S. international or inbound container volume is down 13.5% nationwide. During that same period, domestic intermodal volume is up 5.5% year to date. Heightened transloading activity is one of the reasons why domestic rail intermodal volume has held up better than truckload volume in recent months.”

The CNBC Supply Chain Heat Map data providers 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 firm MarineTraffic; visibility data company project44; maritime transport data company MDS Transmodal UK; ocean and airfreight benchmarking analytics firm Xeneta; leading provider of research and analysis Sea-Intelligence ApS; Crane Worldwide Logistics; and air and freight logistics provider Seko Logistics.

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).