With containerised imports expected to remain at near-record levels for the remainder of the year, National Retail Federation says dockworkers are unloading vessels as fast as they can, ‘but the challenge is to move the containers out of the ports to make room for the next ship’.
US retailer representatives and logistics advisors expect supply chain congestion to continue well into 2022, as strong demand persists and ports struggle to clear backlogs of containers at the country’s main import gateways.
Imports at the nation’s congested container ports are expected to remain at near-record levels for the remainder of the year as retailers rush to move merchandise from docks to shelves in time to meet the expectations of holiday shoppers, according to the latest monthly Global Port Tracker report released yesterday by the National Retail Federation (NRF) and Hackett Associates.
“Dockworkers are unloading ships as fast as they can, but the challenge is to move the containers out of the ports to make room for the next ship,” said NRF vice president for supply chain and customs policy Jonathan Gold. “We need better empty return procedures and more chassis, truck drivers, rail capacity and warehouse workers to keep the system moving.
“Retailers have enough inventory on hand to make sure shoppers won’t go home empty-handed this holiday season. But there are still items sitting on the docks or waiting on ships that need to make it to store shelves and online sellers’ warehouses. Retailers want to make sure customers have product choices.”
More than 70 ships were reported waiting to dock at the Ports of Los Angeles and Long Beach last week, and the wait at Los Angeles has averaged two weeks over the past month, the report noted. “Those delays, in turn, can push back the vessels’ arrival at other ports on their schedules,” the report highlighted. “Some carriers have announced plans to divert to other locations, but congestion is building nationwide.”
Hackett Associates founder Ben Hackett said: “The supply chain continues to come under pressure from all sides,” citing issues ranging from port congestion in the United States to electrical shortages impacting production in China. “It does not look like the congestion will improve any time soon, with most commentators suggesting problems will continue well into 2022 – and that is assuming COVID-19 does not spike again.”
Congestion and disruptions that began in 2020 have continued through the current ‘peak season’ for shipping when retailers normally stock up for the holidays, but many retailers anticipated the challenge and began bringing in holiday goods months ahead of schedule to be sure sufficient inventory would be available, NRF highlighted. NRF has forecast that holiday sales will grow between 8.5% and 10.5% over 2020 – which already recorded record holiday sales of more than US$777 billion.
US ports covered by Global Port Tracker handled 2.14 million twenty-foot equivalent units (TEU) in September, the latest month for which final numbers are available. That was down 5.9% from August but up 1.4% year over year. A TEU is one 20-foot container or its equivalent.
Ports have not reported October numbers yet, but Global Port Tracker projected the month at 2.19 million TEU, down 1.2% from October 2020. The year-over-year decline would be the first since July 2020, after which unusually high import volumes began to arrive when stores closed by the pandemic reopened and retailers worked to meet pent-up consumer demand and to stock up for the holidays.
Even with the year-over-year decline, October would be among the five busiest months on record since NRF began tracking imports in 2002, the association said, adding that “busy cargo is expected to continue through the end of the year, with November forecast at 2.17 million TEU, up 3.3% year-over-year, and December at 2.18 million TEU, up 3.5%”.
January 2022 is forecast at 2.21 million TEU, up 7.6% from January 2021; February at 2 million TEU, up 7% year-over-year, and March at 2.17 million, down 4.1% year-over-year.
The first half of 2021 totalled 12.8 million TEU, up 35.6% from the same period last year. For the full year, 2021 is on track to total 26 million TEU, up 17.9% over 2020 and a new annual record topping last year’s 22 million TEU. Cargo imports during 2020 were up 1.9% over 2019 despite the pandemic, NRF noted.
These expectations of strong demand and congestion continuing into 2022 are consistent with observations from others in container shipping and logistics. As Lloyd’s Loading List reported last week, Maersk CEO Soren Skou expects the strong demand for ocean freight to be maintained well into next year while also underlining that the normalisation of the market remains quite some way off.
“We expect our fourth quarter to be more or less in line with our third quarter and that we expect the first quarter (2022) – which is pretty much as far out as we can see in our booking data – to be in line with the third and the fourth quarter. We will provide guidance on 2022 (full year outlook) when we usually do that, in February (next year), but for now, there’s plenty of demand from our customers,” Skou said.
Consumer and inventory demand
Asked whether the market was showing any signs of ‘normalisation’, Skou replied: “We have a situation right now where there’s very, very strong demand, driven by consumer demand – first and foremost, by American consumer demand but certainly also strong demand in Europe. On top of that, we have very low inventories around the supply chain.
“So, our customers are doing two things at the same time. They’re trying to meet strong consumer demand, but they’re also trying to stock up to increase their inventories. And that’s what’s driving the very strong demand for transportation right now,” he told Bloomberg TV.
“The issue is not really lack of ship capacity. The issue is that the ship capacity is being used up waiting outside ports, and we need to solve the port problem or the labour problem in the ports and with the truckers in order for the supply chains to get better.”
DSV expectations
Jens Lund, chief operating officer (COO) at the major global freight forwarding and logistics group DSV, told Lloyd’s Loading List that he saw no let-up in the “distressed” conditions the sector has been working under for the past 18 months or so, with the current “extraordinarily volatile” state of freight markets likely to be prolonged throughout most, if not all of next year.
“Looking at the problems supply chains are facing right now on the ocean freight side, there are too few ship calls because the ports are already flooded with cargo, there is a desperate lack of available empty containers and also a need for truck drivers,” he highlighted. “And on top, there are all of the COVID-related restrictions with ports shutting down here and there, such as in China.
“There are just too many (negative) factors and nothing tells us that this will change in the foreseeable future. There are no signs of the situation normalising and we expect that in 2022 we will continue to be confronted by what are extraordinarily volatile market conditions – probably all the way through next year,” he noted.
“As for the immediate future, it perhaps goes without saying that we’re headed for a very busy Q4 (fourth quarter) – a peak on top of a peak, one could say; and on a consumer level, people are probably going to have find alternative Christmas presents to those they’d initially planned, as a lot of goods will not arrive in time to be made available for the holiday season.”
While the difficulties in ocean freight logistics – capacity constraints, port congestion and containers in short supply – are set to persist, the picture on the air freight side is hardly any easier for cargo owners, Lund underlined.
“There are bottlenecks here too and spot prices in air freight right now compare with those we were seeing during the peak period for Covid-related PPE shipments,” he noted. “The cost of chartering aircraft is at a similar level to what it was then too.”
As also reported today in Lloyd’s Loading List a survey of the latest US Bureau of Economic Analysis figures by Sea-Intelligence shows a 25% jump in total personal consumption in the year to September.
Much of that growth is accounted for in a reversal of consumption growth back to its pre-pandemic levels following a short, sharp contraction last year. But when that spending is broken out into goods and services, the two-year average growth rate for goods in September was over 5%, while services remained flat, despite a significant recovery since the middle of 2020.
“It would therefore appear that personal spending on goods remains on an accelerated growth trend, albeit it has come down somewhat from an extraordinary peak,” said Sea-Intelligence chief executive Alan Murphy.
There has also been a change in the nature of goods being purchased. Spending on durable goods peaked in early 2021 but the growth rate has since declined, whereas non-durable goods continue to show a gradual upward trend. Sales of big-ticket items such as furniture and furnishings were declining, while spending on smaller appliances continued to increase.
“It appears that this development can be seen as a consequence of the supply chain crunch, where smaller appliances are favoured, as the retail value moved inside a container is larger for small appliances,” said Murphy. “Hence these are goods more likely to be prioritised by the shippers.”
In total, however, there were no signs that the consumer boom was abating. “This means we should not expect a decline in demand to rescue the congestion and bottleneck situation, in the short to medium term,” Murphy said.
Global Port Tracker, which is produced for NRF by Hackett Associates, provides historical data and forecasts for the US ports of Los Angeles/Long Beach, Oakland, Seattle and Tacoma on the West Coast; New York/New Jersey, Port of Virginia, Charleston, Savannah, Port Everglades, Miami and Jacksonville on the East Coast, and Houston on the Gulf Coast.
Source: Lloyd’s
