The status of major ports and the supply chain situation has evolved a bit since the last check-in published here. And while some of those changes can be counted as improvements - with more capacity generally available and better rates for shippers - there are plenty of issues pointing the opposite direction as well. You've probably heard most of the examples of negative pressures, but in case you haven't - a potential California port strike, Covid-19 lockdowns in China, gas/oil prices and Russia's invasion of Ukraine count as a few of the major ones. For the latest on the good news/bad news combination of leveling off to lower spot rates and considerably higher diesel prices, check out our Intermodal Spot Rate Pricing Trendline Analysis updated every week. Let's go into more depth on some of the other supply chain and port status updates of the day.
Port Strike Looms as Congestion Lessens (in some ways) in California
The California ports of Los Angeles and Long Beach as recently as a few months ago were dealing with massive container ship backlogs. And while those backlogs haven't disappeared, they've improved considerably. As of early May, Port of Los Angeles Executive Director Gene Seroka indicated there were 35 ships waiting offshore, down from a peak of 109 in January. For now, one continued issue is concern that railroads are struggling to address a container buildup at LA and Long Beach. A lack of equipment and personnel are being blamed, but whatever the reason, container dwell times for intermodal transportation out of the ports are up, and Seroka indicated more than double the number of containers were awaiting rail transport out of LA this spring than even the worst period of last year - which was bad. And it's had a trickle down effect on other inland rail hubs as well.
The ongoing issues with rail and congestion at the California ports have caused issues with exports, too, and have led logistics pros to get creative with solutions. For instance, for an InTek client in California, our strategy has taken advantage of improved truckload capacity use trucks to carry exports to the Port of Houston. The loads are then transloaded onto containers there and shipped via ocean freight - bypassing the California port and rail issues altogether. Similar diversions are taking place all the way to east coast ports like Virginia and Savannah - though east coast ports are dealing with congestion of their own. But even with these issues in California, the looming cloud is labor negotiations.
This month, talks between the International Longshore and Warehouse Union and the Pacific Maritime Association are getting underway, with a July first deadline for a new contract. Failing an agreement, these workers could potentially strike, leaving the major ports with no staff to handle the continued elevated volume. Strikes have occurred before, and caused definite slowdowns, so there's certainly reason to worry. And port automation appears to be a key sticking point. But while negotiators on both sides expect talks may extend past the deadline, if they remain on good terms and feel progress is occurring, a strike could be averted. Regardless, carriers are planning for the possibility of a strike, which marks another reason the East Coast is seeing heavier volume as ships divert to those ports.
China Port Lockdown Update
Another port concern is in China, as cities face continued lockdowns to stop the spread of Covid-19 as part of the country's Zero Covid strategy. With a massive amount of shipping volume going through China, port workers - most recently in Shanghai - going on lockdown has thrown a major wrench into global supply chains. Carriers have resorted to blank sailings because of the lockdowns, and with the variability of the virus, there are no clear signs as to how long issues will persist in a given city, or popup in another major Chinese port. Just as railroad issues at California ports trickled down inland, issues at Chinese ports are trickling down throughout worldwide supply chains, even affecting trucking in the U.S. There are however some indications that the worst potential impacts haven't been realized yet, so it continues to bear watching.
With all these supply chain issues persisting in early 2022, shippers still have to keep shipping. At InTek Freight & Logistics, our experienced team has a track record of creative solutions to keep the line moving efficiently, combining our know-how and connections with the latest technology to find solutions to shipping problems. Just reach out and we'll discuss how you can put us to work for your company.
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