Aerial photo of containers standing stacked at Qinzhou Port in Qinzhou, China’s Guangxi Zhuang Autonomous Region, 15 August 2022.
China news service | Getty Images
Two of the most important trade lanes for US shippers are heavily congested this peak season. The heatwave in China has shut down key manufacturing bases and the growing backlog in European imports is expected to spill over into the first quarter of 2023.
Negotiations between the verdi trade union and the Central Association of German Seaport Companies (ZDS) remain unsuccessful. This is the tenth round of negotiations. The last date set by the court is August 22nd. If both sides fail to reach a compromise in this tenth round of negotiations, the dockers could strike again.
“Unless a compromise is reached, we can expect further strikes that will exacerbate the already tense situation in the northern ports,” said Andreas Braun, Ocean Product Director for Europe, Middle East and Africa at Crane Worldwide Logistics. “Congestion, ship schedule and intermodal operations are already a mess and more strikes will only add to that. We will not see a return to a normal situation before the first quarter of 2023.”
The CNBC Europe Supply Chain Heatmap shows the impact of deadlocked collective bargaining.
The industrial action is also being felt in Great Britain. From August 21, 1,900 dockers at the port of Felixstowe, the UK’s largest container port, plan to go on strike after talks broke down over their ongoing pay dispute. The strike would last until August through Monday 29 August. Around 40 per cent of all containers arriving and departing the UK are processed in Felixstowe.
The Port of Felixstowe handles more than 4 million TEU annually. A strike in Felixstowe would affect many businesses in the UK. The port is owned by Hong Kong-based CK Hutchison Holdings.
Reviewing bills of lading with ImportGenius from July 1 through August 12, CNBC identified numerous containers loaded with Guinness beer and whiskey for Diago, breakfast cereal for Kellogg, medical equipment, pork shoulders for Pilgrims Pride, flooring, tires for Pirelli Tire and Bens were filled with rice for Martian food.
“If the strike continues, there will be significant disruption to supply chains across the UK,” Braun said. “Ships will see delayed berthing windows, congestion at the terminals but also in the hinterland depots will increase, as a result shippers and recipients will face massive delays in carrying out their transports. The week-long strike will take at least 2-3 months to recover.”
China’s supply chain is feeling the heat
The high temperatures in China are forcing some manufacturers to halt production for six days due to government-planned power outages.
In a joint announcement released by the Sichuan Provincial Economy and Information Department and State Grid’s Sichuan Electric Power Company, industrial power outages have been extended to 19 cities and jurisdictions in the province Monday through Saturday.
Electricity limit notices for manufacturers in Changzhou, Nanjing, Nantong and other regions in Jiangsu province alerted Worldwide Logistics imported customers in an email: “The sudden orderly notification of electricity consumption has made the supply chain more challenging under (the) current situation ( the) COVID-19 epidemicc.”
The Worldwide Logistics email also noted that Shanghai has reported halting production at some factories due to electricity rationing.
Jasmine Wall of SEKO Logistics told CNBC: “Heavy industry companies, such as those producing aluminum and copper, have been hit the hardest. Some office buildings and shopping malls in Shanghai were also affected. Measures to limit output to 12.5 million kilowatts. Some factories in Ningbo, Wenzhou, Yiwu and Quzhou only have to work three days a week. Factories in Anhui, Changzhou, Nanjing and Nantong in Jiangsu Province are also affected.”
Hon Hai Technology Group said that Global Times On Monday, power restrictions at a Foxconn plant in Chengdu had a limited impact on production. The Chengdu factory is one of the sites where Apple watches and computers are manufactured. CATL (the lithium battery supplier for Tesla) is another affected manufacturer. Sichuan is home to some large lithium producers. Intel also has a manufacturing facility in Sichuan.
Solar cell companies are also said to be affected by this energy brake.
Meanwhile, trucking across the country is slower than average due to Covid testing requirements for truck drivers. Delays in trucking due to different testing measures in different cities have increased the movement of commodities and Chinese exports from days to weeks.
These delays are not helping the supply chain with the seven-day Golden Week holiday in October.
Also on the horizon are the additional expected canceled sailings around the holiday, which will limit ship capacity.
“Based on the latest release of Sea-Intelligence’s Blank Sailings Tracker, the number of blanked (cancelled) sailings on major US import voyages remains constant and the outlook for the coming 10-12 weeks is very close to returning to ‘normal’ be. said Niels Madsen, Vice President of Product and Operations at Sea-Intelligence ApS. “However, it should be noted that airlines have not (hopefully) yet included (hopefully) scheduled blanked departures in connection with the upcoming Golden Week ex China, so the number of blanked departures on trade routes ex-Asia to will increase between weeks 40 and 42.”
Container congestion in the US
CNBC US Supply Chain Heat Map shows slight respite with ships at anchor this week.
“We’re seeing an 18.5% drop, from 70 to 57 ships awaiting berth in East Coast ports,” said Josh Brazil, VP Supply Chain Insights at Project44. “The queue, particularly in NY/NJ, has improved from 15 ships to 9 ships over the week. 30 ships are still queued in Savannah and 23 are anchored in Houston. However, it is still too early to say if this improvement will last -forward trend, especially as we head into the peak season.”
However, the wait time for import containers at the Port of Oakland is still in the low double digits.
“The Port of Oakland marine terminals are We still have to clear the backlog as a result of the truck protests that closed the port for a week a month ago,” said Port of Oakland Director Bryan Brandes better serve importers.”
Examining the bills of lading, some products lying in the ports are empty wooden barrels for Robert Mondavi wine, numerous containers with car parts, Melissa and Doug puzzles, Italian furniture and wine, and floors.
The dwell time of empty containers continues to be a problem for the ports on both coasts. In a recent letter to the Federal Maritime Commission, the Harbor Trucking Association, a coalition of intermodal carriers serving America’s West Coast ports, identified 87,000 empty containers at the ports of Los Angeles and Long Beach, including empty depots nearby sitting by docks, trucker yards, or other locations throughout Southern California.
These chassis, holding empty containers, remove the chassis from the pool to be used for pickup imports or dropping off loaded exports. The carrier and the customer will also be charged for the waiting time. The FMC has investigated reports of shipping companies charging daily container fees even when the shipper or trucker may not be able to return the container due to terminal congestion.
Port of Los Angeles Executive Director Gene Seroka told CNBC that the port has continued to move record volumes of cargo while reducing its backlog of ships by 85% since January.
“Even with our current rail challenges, our sea terminals are more fluid than last year,” Seroka said. “This is partly due to our Port Optimizer and improved data that provides more insight into our cargo compared to a year ago.”
Seroka explained that there are about 34,000 containers awaiting rail in Los Angeles and he would like the number to be closer to 9,000. Rail freight waits around 8 days at docks compared to around 3 days before COVID.
“Cargo owners need to pick up their cargo faster than today at inland rail terminals,” Seroka said. “That will allow rail operators to bring more assets back here and load additional freight.”
On the East Coast, in the Port of New York and in New Jersey, officials tell CNBC that the average dwell time of empty containers is 30 days. This pales in comparison to its processing of import containers, which is 8.2 days and export container wait time of 8.3 days. Port officials say their container imbalance is 210,000 containers as of January 2021. These empty containers are piling up in and around the port complex.
The rows of empty containers take up important space in the port and restrict the flow of trade. With increasing delays in ports, logistics companies are keeping an eye on the air as an alternative to ensure delivery on public holidays.
“Due to vessel delays at USEC, the potential for additional empty runs (cancelled) in September and October may result in unexpected space and capacity constraints,” stated Alan Baer, CEO of OL USA. “These reductions may limit importers’ options for seasonal rush freight, forcing companies to use air rather than ocean freight.”
Goetz Alebrand, ocean freight head for DHL Global Forwarding’s Americas region, told CNBC he had never seen so much interest in the air freight industry.
“Right now I would say retailers are doing everything they can to ensure supplies are there when they are needed for the holiday season,” Alebrand said. “I think everyone involved in this logistics market is doing their utmost to ensure Christmas happens this year. We’ve seen cargo go on planes that wasn’t originally intended to be air cargo. Of course, retailers want to meet the seasonal demand. At the moment we see air capacity, especially from China and from Vietnam, as a hot market.”
– Pippa Stevens and Eunice Yoon contributed to this report.
The CNBC supply chain Heat Map Data providers are Everstream Analytics, an artificial intelligence and predictive analytics company; global freight booking platform Freightos, creator of the Freightos Baltic Dry Index; logistics service provider OL USA; supply chain intelligence platform FreightWaves; supply chain platform Blume Global; third party logistics provider Orient Star Group; marine analytics company MarineTraffic; project44 for maritime visibility data; maritime data company MDS Transmodal UK;Benchmarking and market analysis platform for sea and air freight ratesXeneta; leading provider of research and analysis Sea-Intelligence ApS; crane global logistics; and Air, DHL Global Forwarding; freight logistics provider Seko Logistics; and planet,Provider of global, daily satellite imagery and geospatial solutions.