What started as a small COVID-19 outbreak in Yantian port is now having a crippling effect on all Southern China ports. There are more than 40 containerships at anchor outside Yantian and more than 60 void sailings announced for the rest June. Nearby, Nansha and Shekou ports are suffering under burgeoning container flow, as regular Yantian cargo is shifted there. Handling more cargo however, while working under their own COVID-19 protocols, has resulted in highway congestion, longer wait times, and a growing pile of containers in those ports. Truckers are stretched thin as their hours of service are consumed on lines, or by longer triangular hauls between ports as far away as Chiwan or even Hong Kong, which has additional border crossing issues of its own.
This latest COVID-19 outbreak—another in a string of black swan events—is now eclipsing the number of containers impacted by the ‘Ever Given’ grounding in the Suez Canal. That incident was cleared up in a matter of weeks. This one may well extend several months due the knock-on effect of the holiday cargo season that traditionally begins in July and continues—with the heaviest volume of the year—through summer. In the meantime, West Coast ports continue their struggle to handle pre-season volume where anchored ships there are experiencing average wait times as follows:
- LA/LB: 3-7 days
- Oakland: 15-20 days
- Seattle/Tacoma: 8-10 days
- Vancouver: 8 days
- Prince Rupert: 2 days
On any given day in the TransPacific trade lanes, more than one million TEUs are sitting idle aboard vessels while awaiting berths. Those containers are not flowing to importers and subsequently are not being turned for exports on both sides of the trade. This is exacerbating the container shortage we have been experiencing for months now, just as the highest volume of the year is about to hit. Worse yet, the longer vessels remain at anchor, the more involuntary void sailings are created on the other side.
What to Expect
The unfortunate effects for the remainder of this year will be felt in further supply chain disruptions, and even higher prices, as shippers compete for fewer vessels, and fewer empty containers. Freight rates—including premium surcharges—do not seem to have peaked yet, given this worsening scenario. There is no doubt that ocean carriers are profiteering on this situation, as there is no cap on their pricing. It is a seller’s market.
GRIs and PSS charges are sticking every 15 to 30 days, while premium surcharges needed to secure bookings often more than double the all-in rate. With no end in sight of ever-increasing demand, and the long recovery from black swan events that caused the shrinking supply, it looks like 2021 will usher in even higher records for both ocean and air freight costs.