We are seeing measured congestion in every corner of the globe, which accounts for more than 10% of all containers in transit being stuck waiting somewhere. Cargo that backed up during the Yantian COVID-19 outbreak, will be hitting USA ports for the next six weeks, and the holiday cargo season is also upon us.
With no reduction in sight and record imports continuing to arrive, our infrastructure has slowed to a crawl at a time when it should be accelerating. When velocity slows, all efficiencies of the system are lost. In a report from the JOC, “T-18 is so congested that SSA has been forced to turn down some longshore labor gangs that are available to work vessels each day. If SSA worked all the labor that is available, inbound containers would be discharged from vessels faster than the terminal could handle them.” In other words, they must slow the number of containers coming into their already overloaded terminals, since the containers have nowhere to go until more can be evacuated.
It is a vicious cycle where each issue we face, impacts others in the chain. Meanwhile, until we see an appreciable reduction in demand, we will not only remain congested, but the problems may even worsen over time. Rates will continue to spike up and down based on specific weekly demand, and of course can be impacted—at any time—by yet another black swan event, such as COVID-19, demand shock, the Texas winter storm, or the Suez Canal blockage.
We are at a very tenuous balancing point that could go either way, at any time. Sadly, the reality is that higher rates will be with us for some time to come, with little chance of returning to where they once were in the last 20 years.
The light in this dark tunnel might be found in a first or second quarter calm, before the next busy summer season. Following that, the newly built vessels being ordered today will potentially add more than 10% capacity to the trade in 2023 and 2024. The question that remains—will we have figured out how to handle the additional volume at our nation’s ports and rail terminals, by that time?