Global Shipping Congestion & Skyrocketing Rates

Posted 05/24/2021

We have been reporting monthly on the various issues confronting the global supply chain. Unfortunately, there is still no relief in sight. Last week WSSA participated in a webinar produced by the Women’s Leadership Council of WSWA entitled “Anatomy of an Import." Other speakers included Christina Mariana-May, CEO, Banfi; Dina Opici, President, Opici Family Distributing; Sonia Davenport, Director of Consumer Insights, RNDC; and moderator was Jennifer Engel, SVP National Accounts, RNDC. We highly encourage anyone interested in hearing a 360 degree perspective on the challenges facing the import industry to listen to the recording. The participants share insight from importer, distributor and logistics viewpoints and also provide some key tips on managing through this crisis.

Planning is the most difficult part, both in terms of scheduling and costs. Europe remains one of the hardest hit areas, with  lack of equipment in almost all regions. Thus, even if slots are available on a vessel, there may be no empty equipment available to load. Supplier warehouses are getting full as third party warehouses. Published vessel schedules and even web-based container tracking on carrier sites are not reliable. Last week, there were more announcements on new Equipment Surcharges and other rate increases published commencing in mid-June, with no firm indication of validity.

New Zealand also remains very tight on equipment and space on vessels, especially for the US East Coast. The port of Nelson, a key port for the Marlborough area of production, is extremely backlogged. The feeder vessels that pick up at Nelson are off schedule and continually rolling cargo scheduled for pick up. We received announcements of significant rate increases in this region as well. The situation for both Australia and NZ to the US West Coast is potentially facing an issue with more Oakland port omissions, and we will keep you posted as this situation develops. 

For South America, the biggest problem area is vessel space to the US West Coast, with all vessels overbooked and difficulties at the transhipment ports. With no direct service from Chile to the USA, we are seeing cargo congestion and schedule disruption at these transit ports. 

In Mexico, the storms last week damaged many areas around the Laredo border, and there was a temporary closure of the crossing, thus creating backlogs and lack of truck power. In this challenging time, even a short closure or small weather incident has a significant trickle down effect. 

In the USA, truck power remains challenging in many areas, and moving cargo out of the largest ports can take days if not weeks. Rail congestion is also creating issues, and getting cargo from railheads within the two day free time can be virtually impossible at the busy hubs. With congestion on both sides of the import or export shipment, remember to insure your products. The WSSA policy is designed to meet the unexpected situation, including the longest duration of risk coverage possible.

The million dollar question is, “When will this crisis be over?" Our best prediction at this point is that we will see some “normalization” by the end of the year. While the next weeks/months may get even worse, we should see gradual improvements due to a few factors:

  • Improved weather in the Atlantic thus fewer schedule disruptions caused by bad weather.
  • Slightly increased vessel capacity in the Atlantic trade lane.
  • Return to full work force of labor and drivers in the USA due to vaccination roll out.
  • Consumer spending moving to services (travel, tourism, restaurants) instead of goods, thus gradual reduction of demand for goods.
  • New containers rolling out of manufacturing sites and introduced into the supply chain.
  • Suez Canal disaster “catch up” and scheduling getting back on track.

The above are all fairly speculative, and, in the meantime, everyone needs to continue to plan for longer lead times and higher costs. Should you want more information on the rising costs and predictions, please feel free to read this Freightwaves article. We also hope you will view the recording of the webinar via the link here. We are planning to conduct a follow up webinar on the crisis toward the end of June, so stay tuned for more information and opportunity to gain valuable insight on the market conditions.