Thought Leadership

Perfect Storm at Shipping Ports

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Shipping Port – Container capacity constraints and congestion at shipping ports have created a perfect storm which could ripple onshore and hamstring transportation and logistics networks across the Americas. In Europe, the distressed situation due to capacity constraints at shipping ports is driving more trucking freight including on the China-Europe corridor.  In the United States, while operations at the Port of Los Angeles, the nation’s #1 container port persevered throughout the COVID-19 pandemic, a recent surge in cases is impacting shipping port servicing and compounding port congestion.

A Spike to Close 2020

The pandemic also truncated supply-demand dynamics with decreased demand translating into lower sea freight rates, albeit at a slightly elevated trend compared to 2019. The decline lasted through late spring when despite the firm onset of COVID-19 globally, signs of volume rebound emerged. Most significantly, the spike in late November posted a 1.5x increase over 2019 prices due to accelerating containerized volumes.  This surge in volumes, which was experienced at various magnitudes at ports across the U.S. from Miami to Los Angeles, has setup widespread schedule delays at the start of 2021.

shipping port, port and shipping management
Source: ShipHub

Container capacity shortage

The Chinese New Year may have provided a reprieve on the Asia-U.S. trans-Pacific shipping  route during mid-February, but activity has picked back up quickly as post-pandemic economic rebounds led by China continue to unfold. While freight prices may ease after the Chinese holiday, they are likely to remain higher than usual. Moreover, the deferred volume due to imports being held back during the high freight prices will be an overhang of uncertainty in the market.

In concert with volume-induced shipping port congestion, container availability has added to the port and shipping management conundrum. The container x-change index showed a sharp decline going into the 4th quarter of 2020, with a rebound in the final weeks of the year. However, container availability remains depressed way below the seasonally expected dip (see chart)

shipping port, port and shipping management
Source: FreightWaves, Container xChange

Proudfoot Solutions

Naturally, the gridlock situation at the shipping ports will have a trickle-down effect to other components of supply chains including trucking and rail transportation. Unforeseen events are among the biggest risks for supply chain, fortunately we have prewarning in this particular instance.  Proudfoot has a range of capabilities to help you plan ahead, identify areas to optimize your network and lower your cost of ownership.  Engage with a partner who is experienced in managing risk to ensure resilient operations that drive EBITDA maximization.

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Posted on March 9, 2021

By Proudfoot Team

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