October 9th, 2020


Significant Market Challenges Continue into 4th Quarter

Space, congestion and equipment shortages highlight the recent weeks of obstacles and issues for both USA inbound and outbound ocean freight shipments. With the Golden Week holiday concluding in China, it is anticipated that volumes to the USA will remain high for a few more weeks, especially those destined to the West Coast from China and Southeast Asia. The shorter transit to the West Coast will be used to move in inventory primarily destined to distribution centers and warehouses in the west region of the USA. It is also the last chance for a west coast termination and use of transload and truck services for inland points in order to make deadlines for arrival into distribution centers and then out to store shelves for the holiday season. There is also inventory that will shipping in for E-Commerce distribution, creating a slightly longer international shipping window since the product in this case does not need to be on a store shelf, rather just the distribution center or fulfillment warehouse to handle future online purchases.

For your reference, please find the following scenarios that remain a factor in the current market conditions and should be closely evaluated in the coming weeks.

   -  There has been an increase in congestion and departure delays from many origin ports, in particular China. Weather, overbooked vessels and terminal congestion are just a few causes.

   -  Container equipment shortages are still an issue at many Asia and Southeast Asia ports. This is mainly due to container imbalances and the surge in departing volumes.

   -  India is the most recent victim of widespread container shortages that could last for many more weeks, some insinuating months, to come. This is created by the lower frequency of arriving inbound vessels and continued progress of business activity supporting exports as their recovery from COVID lockdowns improves.

   -  Congestion continues at major North America ocean ports and rail ramps as the surging inbound volume remains a challenge and exports add to the mix.

   -  There are still labor shortages being reported at the terminals, impacting vessel unloading times.

   -  Tight or sporadic chassis shortages continue to be reported across major ports and rail ramps across the USA. 40’ and 45’ chassis are the most reported chassis equipment that is often unavailable. The impact is delaying deliveries on imports and delaying container stuffing and loading of exports.

   -  West Coast terminals, in particular Los Angeles and Long Beach, are volatile on a weekly basis where although improving, backlogs can still take several days for a container to get recovered out of many terminals. Chassis shortages have become the main factor and continues to cause increased demurrage for importers.

   -  The average recovery time of a full container from many USA port terminals is still as high and can still be as much as 5 hours at peak congestion levels, leaving little time to make the actual delivery in the same day. This is still creating a necessity for yard pulls to the drayage carrier facility and delayed delivery.

   -  Appointment restrictions on empty container returns has improved, but it still expected during peak congestion periods to create backlogs and delays. The impact directly effects timely returns, forced detention charges, and further delay the use of the chassis on new loads.

   -  Thousands of containers and chassis remain idle at warehouses and distribution centers, waiting to be unloaded. With the surge in volume, replenishment in inventories, and preparation for holiday sales, this has been one of the larger factors of the chassis shortage across the USA.

   -  The majority of drayage companies have begun to implement congestions surcharges and peak season increases to cope with the demand. Even base freight rates are being raised expenses and driver pay begin to increase with the demand.

   -  Air Freight will see space tighten and rates increase as the seasonal demand begins.

   -  Warehouses across the country are reporting to be at or near full capacity, with some at critical levels and unable to receive any new freight.

   -  Truck Load imbalance is likely to continue through the remainder of this year, which will increase rates in the impacted regions.

There is also talk at this time that importers could continue to replenish inventories well into the first quarter of 2021 as they continue to recover from recent lockdowns or proactively ship to ensure timely arrival of seasonal merchandise. With current delays that are being experienced and as much as two weeks of delayed transit time, warnings are starting to take shape that highlight the possibility of many challenges in the first quarter of 2021, should the demand for ocean freight space continue. This could mean continued tight space, higher rates being maintained by the steamship lines, and even delays for portions of the country exposed to extreme weather. Winter sailing schedules and vessel capacity will be closely watched as vessel string, routings and sailing frequency are normally adjusted to offset the natural decline of volumes after the holiday rush that traditionally concludes in October. It is also worth mentioning at this point that Chinese New Year falls on February 12, 2021 and can set off a rush of volume just before and shortly after the holiday, which will need to be monitored as the time gets closer and a factored in booking practices if advance planning is needed.

As usual, we must continue to advise that there is still a great deal of uncertainty in the coming weeks and challenges to endure, some that are unforeseen at this time. We do highly recommend that you prepare for continued disruptions, volatility in costs, likely congestion, and increased delays. Please do your best to plan in advance and communicate with all parties involved in your transactions. Do not hesitate to contact us should you have questions or need further guidance.