Labor strikes and slowdowns at ports in Germany, Antwerp, Belgium, and Rotterdam, Netherlands, are crippling trade and could trigger more logistical inflationary pressures for U.S. importers and consumers.
Labor strikes and slowdowns at ports in Germany, Antwerp, Belgium, and Rotterdam, Netherlands, are crippling trade and could trigger more logistical inflationary pressures for U.S. importers and consumers.
The German trade union Ver.di and the Central Association of German Seaport Companies (ZDS) will enter into their sixth round of negotiations on Tuesday. After warning strikes surrounding the subject of wage increases, the congestion that has been created is so solid that it will take at least three months for the pileup to be cleared out of the ports, according to Andreas Braun, Europe, Middle East and Africa ocean product director for Crane Worldwide Logistics.
“Ocean carriers have diverted to Antwerp and Rotterdam but this has now created congestion at those ports,” Braun said. “A domino effect of congestion has been created and delays at other European ports and this is expanding over into the U.S. East Coast. There is no avoiding it.”
Antwerp’s union recently had a one-day strike protesting for a better wage in the face of rising inflation. The rails in Rotterdam are currently crippled under miles of piled-up containers as a result of labor slowdowns and the rails being shut down because of jammed yard capacity at the German ports of Hamburg and Bremerhaven.
According to the CNBC Supply Chain Heat Map, the majority of pipes of trade within the European port system are clogged — from vessel availability to trucking to container availability and processing.
Braun explained the delays have U.S. importers now adding four to five weeks into their calendars when looking to book a vessel. The rail congestion has also created a dislocation of containers, which is impacting availability.
Dislocation of containers was one of the reasons behind the push-up in rates during the pandemic and Braun said it could happen again. These costs are passed over to the consumer, which adds to inflation.
“The issue with the empties starts with the importing vessels which are delayed and then you have the ports that are congested,” explained Braun. “Normally, you would get your containers out of the hinterland but that is a challenge because of rail congestion. Capacity constraints can put pressure on rates.”
US labor and trade
In the United States, logistics managers are holding their collective breath to see if the International Longshore and Warehouse Union and the Pacific Maritime Association will stick to their joint statement that they are not planning any strikes or lockouts. One of the issues being discussed is a fair wage, just like what is being negotiated in Europe. While the location of the workers may be different, the subject of pay is the same.
Both unions and employers are negotiating in an environment in which the employers (ocean carriers) have been making record profits and the longshoremen who moved the mountains of containers that generated those profits want a fair wage. As we all know, the subject of a “fair wage” is viewed very differently depending on what side of the negotiation table you sit on.
Automation will also be another key piece to this negotiation. Simply put, the PMA wants to further develop automation to improve port efficiency. The ILWU says it’s a jobs killer.
Looking at the CNBC U.S. Supply Chain Heat Map, which highlights port efficiency, peak season volumes can be seen in the anchorage times, and the dwell time for import containers is ticking up in Oakland, California, and Seattle. But don’t be fooled by the green in this category for the ports of Los Angeles and Savannah, Georgia. They are nearing the data metric to flip to moderate congestion.
As a result of West Coast port congestion, logistics managers have been consistent in their port diversification moving containers away from the West Coast. But remember, only so much can be moved. Approximately 40% of the nation’s trade enters and leaves these 29 West Coast ports. Seventy-four percent is from the ports of LA and Long Beach alone.
According to the National Association of Manufacturers, any strike or stoppage would cost the U.S. economy $500 million a day. The National Retail Federation sent a letter signed by 150 local, state and national trade associations to President Biden urging the administration to continue to work with the parties to reach an agreement.
“The only way to resolve these issues is for the parties to remain at the bargaining table and negotiate in good faith,” the letter stated.
The stakes are high in the closely connected world of trade. We have inflationary pressures building as a result of labor impasses in Europe. Unfortunately, the memories of the 2002 and 2014 lockouts and slowdowns in the U.S. have not faded in the minds of logistics managers. The economy now is facing a whole new set of challenges. The fate of more inflation that would be created by any type of slowdown is now in the hands of the ILWU and PMA.
Federal Maritime Commissioner Dan Maffei says in an interview that the bill will return “credibility to the supply chain.”
The scales of trade for U.S. importers and exporters have been severely tilted against them since the pandemic. President Biden is expected to sign the Ocean Shipping Reform Act on Thursday. Importers hope this update giving the Federal Maritime Commission more power will help restore that balance. SONAR charts show the current actions of the ocean carriers on rejecting container orders which has smacked U.S. exports.
American Shipper spoke with Federal Maritime Commissioner Dan Maffei on the passage of the bill and what participants in the world of trade should be aware of.
LL: First off, some are concerned this bill will not give the FMC enough regulatory authority to implement all 12 of FMC Commissioner Rebecca Dye’s final recommendations in her two-year fact-finding investigation into ocean shipping supply chain issues during the pandemic. Do you believe it will?
Maffei: I think this will do substantial good, particularly with the D&D [detention and demurrage] rule, which we all passed universally. D&D should not be a revenue source. It should be a deterrent to move cargo. I am bullish on the bill and restoring credibility to the supply chain. In terms of D&D, [the bill] gives us the authority we need. We don’t want to go too too far. Not all D&D is unreasonable. You have terminals filled with containers being used as shortage facilities because of the lack of warehouse space. You need to have the fee. We will write the best rule we can and we will go back if we need to. You don’t know until you do it. I thought the interpretive rule was good, but it is a work in progress. This legislation is not the end all be all, but it will restore confidence in the supply chain.
LL: Detention and demurrage has been a problem for importers for years. Over the summer, the Department of Justice was folded in. Did that help speed up the process at all? By transferring the burden of proof regarding the reasonableness of detention or demurrage charges from the invoiced party to the ocean carrier, are you expecting more filings, and if so, will the FMC be able to handle the load?
Maffei:I’m hoping there will be more filings, more cases where shippers come forward. That said, you don’t know. The other good thing is this bill does address the fear of retaliation. Will we catch every unfair carrier? No, but I can say they are not going to get away with it forever. Can we handle it with current staff? No, but I expect there will be more resources coming along and that is what [congressional] committees indicated and have the president’s support.
LL: My reporting and investigation into the decrease in U.S. exports uncovered the two ocean carriers declining the most U.S. exports are the two Chinese government-owned Ocean Carriers-OOCL. The Phase One obligations by the Chinese have never been met yet the Chinese have two carriers that could easily carry the agreed to trade products. How quickly will we see this change?
Maffei: There are a couple of steps here. There has been some improvement because Congress has made it serious and we started asking about exports. Even asking about it is encouraging many carriers to have more robust export programs. Passing this bill sends a clear message, and we have to have a rule made in the first six months. I think there will be progress. Once the carriers know what the rules will be, they generally want to get ahead of them. This bill may not be as stark as the House bill, but it is the biggest overall change to exports.
LL: What about the new entrants? When will we start to see action on them?
Maffei: Yes, but with an asterisk. It will take a while to implement this rule. It is a top priority, but even at full speed ahead, because of administrative procedures, we are looking at six months. I honestly don’t know if all of them will still be in existence. If they want to stay in this business, they have to be fair to exports.
LL: Long-dwelling chassis are a problem at ports on the West Coast and East Coast. This is a reflection of packed warehouse space. Studies take time. How quickly will the industry see recommendations on best practices for chassis? Are you going to address the agreements between the chassis providers and the ocean carriers? Maffei:We will certainly implement the bill as written.
LL: Are empty container restrictions on the table?
Maffei:We are very cognizant equipment issues are going to remain one of the biggest impediments for exports. The House bill addressed it but that does not mean the FMC is not handling it. There are a number of ideas. FMC’s Rebecca Dye and Carl Bentzel’s teams are looking for ways to help but it is a trickier issue.
LL: FMC Commissioner Carl Bentzel has been an advocate for the FMC to have more jurisdiction over the railroads. The problems on the West Coast is one of the biggest reasons for the ports’ inability to swiftly move out containers. You also have carriers having fewer intermodal containers going inland. What will we see here?
Maffei:There is a fair amount of precedent if a container comes from the ocean the FMC does have jurisdiction over the container. We are continuing to address the issue.
LL: A digital line of site into the supply chain and logistics is needed in the United States for efficient trade movement. Has there been any discussion with the ports on how can be done on a collective basis? You have seen the Port of Oakland and AWS teaming up. The Port of Long Beach with their initiatives with the inland Port of Utah. There are many siloed bubbles within ports that inhibit efficiency. Isn’t it time for these bubbles to be
Maffei:This is outside the jurisdiction of the FMC and the bill. We are providing a forum for the port parties to get together. As an independent commission we aim to be an honest broker. There is a data collection provision in this bill but that is in the process of being reviewed.
LL: Finally we have spoken about this before and that’s the rate on containers. You have said it is the free market and it’s a reflection of supply and demand. How will the FMC navigate this price of containers?
Maffei:You have a bunch of things going on. You have decreases in rates partially related to the decrease in demand. It’s one step back for two steps forward. We continue to look for any artificial lowering of supply for a potential violation. The Justice Department is looking into it. If we find there is a negotiation of price amongst alliance members that is not in their agreement. We are giving a lot of scrutiny but we don’t have a smoking gun. The market today is more concentrated. When the president says from “20 to nine,” he means market carriers. Importers and exporters now have nine choices, not 20. We need to make sure the industry is on a level playing field.
Shanghai’s weekend quarantine of 15 out of its 16 districts affected the flow of exports bound for the Port of Shanghai, according to CNBC Supply Chain Heat Map provider OrientStar Group.
Shanghai’s weekend quarantine of 15 out of its 16 districts affected the flow of exports bound for the Port of Shanghai, according to CNBC Supply Chain Heat Map provider OrientStar Group.
“Highways were closed because of this latest round of quarantine,” the logistics company told CNBC. “Trucks loaded with cargoes and containers were unable to enter the Shanghai terminal. Many clients have no choice but to change the loading ports to Ningbo or other outports along the Yangtze River.”
During the two-month lockdown that started in April, the port of Ningbo became the alternative port for logistics and, as a result, congestion at that port has been increasing.
OrientStar Group reported there are still positive COVID-19 cases found in certain districts in Shanghai and regulations are still being imposed in those areas to limit the spread.
“Production and manufacturing are basically resumed in Shanghai, but once there are quarantines, transportation and drayage are affected to a certain extent,” the group added.
Raw material shortages during the lockdown affected production for companies Volkswagen and Tesla.
Before the latest restrictions, truck drivers were still required to provide a nationally recognized 48-hour negative COVID test result and traffic permit, said Akil Nair, Seko Logistics’ vice president of global carrier management and ocean strategy for Asia Pacific. In practice, he said, many local governments have also demanded that tests be retaken locally and on highways.
“Some drivers are cautious about delivering into Shanghai and capacity has yet to fully recover to pre-lockdown volumes,” he said.
The latest quarantine restrictions came at a time when trucking recovered to around 80%.
U.S. trade tea leaves
OrientStar Group is also seeing a pick-up in West Coast cargo, which has been trending down. This is a forward-looking indicator of the container uptick that many logistics experts were predicting. Containers bound for the East Coast remain strong and stable.
Akil Nair, Seko Logistics’ vice president of global carrier management and ocean strategy, said once Shanghai does open up, drayage rates will spike $500-$1,000 across China and the rush of cargo will overwhelm the Ports of Los Angeles and Long Beach.
“There are a few reasons why this will happen,” he explained. “The first, carriers are already reducing inland port bookings. This will increase dwell times on dock in [Los Angeles and Long Beach], thereby further congesting, consuming chassis, etc. Railroads also continue to struggle to feed sufficient stack cars to the ports of Los Angeles and Long Beach to cover the inbound volumes. Once Los Angeles and Long Beach are backed up, that will then spread to the ports of Oakland and Seattle/Tacoma.”
To regain some semblance of control over the situation, logistics managers continue to move more containers to the East Coast and Gulf Coast.
Unfortunately, the volume of containers is creating congestion. To keep up with growing container volume, the Port of Houston recently announced gate hours on Saturdays for the rest of the year. The Port of Savannah is using its pop-up container storage lots to free up land capacity.
“2022 is showing us that East Coast ports are just as susceptible to congestion,” said Brian Bourke, chief growth officer of Project44.
Europe labor strife continues
The German ports are feeling the heat as a result of labor strife.
Negotiations between the union ver.di, which represents about 70% of the port workforce, and the Central Association of German Seaport Companies continue. Union workers had a “warning strike” during the Thursday evening shift at the ports of Emden, Bremen, Bremerhaven and Wilhelmshaven.
The Port of Hamburg is already congested with containers. So much so, the railroad cannot move in any export containers.
Andreas Braun, EMEA ocean product director for Crane Worldwide Logistics, says any loss of manpower will only add to the congestion.
“Feeder operators see up to five-day delays waiting for berth to pick up their containers, and round trips between Rotterdam-Dublin-Rotterdam have increased from six to nine days. More vessels need to be injected by the feeder operators to keep the schedule somehow reliable,” Braun said.
The Port of Hamburg, Europe’s third-largest container port and the largest railway port, is a key port for autos. For the United States, key exports of auto parts, tractor supplies, laminate flooring and lithium batteries for automakers like Ford come through the East Coast ports. Companies such as BMW, Rolls-Royce, Volkswagen, Michelin, Ford, Ikea, BASF, Siemens and Bayer export their products out of the Port of Hamburg.
The CNBC Supply Chain Heat Map data providers are artificial intelligence and predictive analytics company, Evergreen Analytics; global freight booking platform Freightos, creator of the Freightos Baltic Dry Index; logistics provider OL USA; supply-chain intelligence platform FreightWaves; supply chain platform Blume Global; third-party logistics provider OrientStar Group; marine analytics firm MarineTraffic; maritime visibility data company Project44; maritime transport data company MDS Transmodal UK; ocean and air freight benchmarking an analytics firm Xeneta; leading provider of research and analysis firm Sea-Intelligence ApS; Crane Worldwide Logistics; and air and freight logistics provider SEKO Logistics.
Both sides were slated to return to the negotiation table Friday.
Workers at the Port of Hamburg, Europe’s third-largest container port and the largest railway port, have followed through on their threat of a strike. In addition to Hamburg, the German ports of Emden, Bremen, Bremerhaven and Wilhelmshaven are also impacted by striking workers. About 70% of Germany’s port workforce is unionized.
One of the port employers, HHLA-Unternehmenskommunikation (HHLA), told American Shipper the German trade union ver.di called for a warning strike from 3 to 7:30 p.m. Thursday at all German seaports.
The Central Association of German Seaport Companies (ZDS — Zentralverband der Deutschen Seehäfen e.V.,) described the warning strike over wages “with great incomprehension.”
“We are in the middle of an absolutely exceptional situation. Global supply chains are severely disrupted. On the one hand, a large wave of delayed ships is approaching us; on the other hand, there are major bottlenecks in rail freight traffic. Calling for warning strikes now is absolutely irresponsible,” ZDS said.
“It also does not do justice to the current collective bargaining in any way. We have a comparatively high wage level in German seaport operations. In the last round of negotiations, given the currently challenging inflation rate, we made an offer that compensates for the losses of our employees in real wages. This offer is in line with many other current ver.di collective bargaining agreements. The fact that strikes are now being called in the current crisis framework is completely unacceptable. We call on the ver.di Federal Tariff Commission to refrain from strikes and to negotiate on the basis of our good first offer.”
Leonard Kuntscher, ZDS spokesman told American Shipper, “This is the first strike in decades. In the last negotiations, the union got our demands. Tomorrow, the negotiations will continue. The union is demanding compensation for inflation and additional increases. In total, the demands amount to a 14% increase in one year. Our offer from May is for a plus of up to 7% in two years.
“The strikes [Thursday] will last only a few hours and are related to the negotiations [Friday]. In principle, there is a good chance that we can conclude the negotiations [Friday] at our third meeting. In any case, our side is ready to talk and compromise. Accordingly, we have little understanding for the warning strikes [Thursday]. Whether there will be further strikes depends on the negotiations [Friday].”
American Shipper previously reported the possibility of a work stoppage.
Andreas Braun, EMEA ocean product director for Crane Worldwide Logistics, told American Shipper that because of the port’s significance in feeder connections, this is going to affect the efficiency of containers being processed both in and out of those ports.
“Feeder operators see up to five days’ delays waiting for berth to pick up their containers, round trips between, as an example Rotterdam-Dublin-Rotterdam, increased from six to nine days, and more vessels need to be injected by the feeder operators to keep the schedule somehow reliable,” Braun said.
The Port of Hamburg is a key port for automobile exports.
American Shipper reviewed the bills of lading using ImportGenius from May 1 to Monday. Items ranging from auto parts for Rolls-Royce and Volkswagen, tire products for Michelin, lithium batteries for Ford and Siemens arrived into the East Coast ports along with BMW motorcycles. BASF and Bayer are also major exporters.
In addition to autos, building products like laminate flooring, furniture from Ikea, Royal Caribbean spare vessel parts, Red Bull products and marketing displays, food and even Steinway piano parts were also included in recent shipments.
According to Crane Logistics in an alert to clients, there are more than 40 container vessels waiting for port discharge and arrival. A total of 150,000 containers are waiting to be exported. Rail services were already suspended due to containers on rails and containers piling up as a result of the labor slowdown prior to the strike. Construction was also listed as a factor in the suspension. American Shipper has reached out to the rail division for an update on the impact of this strike.
It is important to remember that this strike not only impacts the importer or exporter, it hits the logistics provider and ocean carriers as well. A vessel or container at rest is not making money. Some logistical providers noted on the bills of lading are C.H. Robinson, DHL and Seko Logistics. Ocean carriers include Maersk, APL, CMA CGM and MSC.
Braun tells American Shipper he anticipates this strike to go between three and five days, and this will only add to the congestion problems created by the recent labor slowdown.
“The supply chain has already been disrupted for at least four to six weeks,” Braun said. “This strike will drastically slow down any movements on export and import, and at the same time congestion in front of the ports will rise.”
Exports from the five German ports have been significantly impacted due to the labor slowdown.
“The labor at the Port of Hamburg going on strike is particularly bad timing,” said Craig Grossgart, SVP for the global ocean product at Seko Logistics. “The carriers are trying their level best to get back on base so they can provide some semblance of service again and now to throw this spanner in the works just as Shanghai is opening seems to be selfish and ill-considered.
“If we are going to get out of this supply chain mess that we are in today, every component of the supply chain has to work towards the greater good and demonstrate some selflessness,” Grossgart said. “Here in the U.S., the railroads need to get empty cars to the West Coast, waterfront labor has to show up to work, customers have to try to return chassis and boxes earlier. Not helpful, Hamburg.”
There is one reason behind this trade snarl. One. Can you guess? Bet you can’t unless you are an importer.
“Not it!” It seems some in maritime and logistics are still playing a game of tag.
We all know the flow of trade is a series of pipes that all depend on each other so trade can flow efficiently. Now the pipes are clogged and corroded, and it turns out the “pipes” within this trade system are blaming the others for the corrosive contagion.
There is one reason behind this trade snarl. One. Can you guess? Bet you can’t unless you are an importer.
It’s the lack of willingness among some participants in trade to accept any type of blame. They blame the other stakeholders. As children, we were taught our actions had consequences — good or bad. How has this life lesson been thrown out the window?
The finger-pointing in the supply chain is nothing new. In fact, it has gotten even hotter with the transparency of the CNBC Supply Chain Heat Map, powered by the analysis and data from 12 firms. Importers are rejoicing: true data transparency. Yet in this world of free speech, those companies within the pipes of trade are mad that questions about their service are being raised on social media..
On my LinkedIn feed, a logistics industry participant was voicing his frustration with the Oakland SSA Terminal’s performance. It’s his right to complain. So what happens? SSA emails him demanding to know what he was going to send me, which he forwarded on to me.
Really? It’s his right to speak his mind on a news story.
As a journalist, I never take anyone’s word. I want facts. I’m a data geek. No matter the comment by a LinkedIn follower, the CNBC Supply Chain Heat Map shows that the dwell time for imports and exports out of Oakland is up. The LinkedIn commenter was not inaccurate with his experience.
“I just want to know when is the terminal going to make the cargo available?” asked Peter Schneider, president of T.G.S. Logistics Inc. “When is a container really available? The BCO can track their cargo in another country, we can track the container on the vessel, but once that container arrives in port it goes in a black hole. All importers large and small need to get an equal shot of getting their containers swiftly. It’s really the BCO that is paying for everything.”
American Shipper reviewed the emails between Schneider and SSA, and his comments on the amount of dwell time he was going to face were literally verbatim from the SSA representative’s email. American Shipper did reach out to SSA for comment. At the time of the publication, a response was not given.
So what are logistics executives like Schneider doing at this time? Waiting.
According to SONAR, the transit times from China to Oakland resemble more of a hike up a mountain.
With ocean carriers skipping or omitting the Port of Oakland from their schedules, it is no surprise booking volumes are down.
So if vessels are not arriving as much as they once did at the Port of Oakland, why are dwell times up for imports? There’s a multitude of reasons — importers using their free time holding products they no longer can sell because they came late, warehouse capacity, trucking, chassis availability, container restrictions, etc.
There are more reasons but why belabor the points that have been made since this pandemic congestion started? We all know the problems. So what needs to get done? Accountability. Stop pointing the finger. Someone is going to lose an eye.
The CNBC Supply Chain Heat Map data providers are global freight booking platform Freightos, creator of the Freightos Baltic Dry Index; logistics provider OL USA; supply chain intelligence platform FreightWaves; supply chain platform Blume Global; third-party logistics provider Orient Star Group; marine analytics firm MarineTraffic; maritime visibility data company project44; maritime transport data company MDS Transmodal UK; ocean and airfreight benchmarking analytics firm Xeneta; research and analysis firm Sea-Intelligence ApS; Crane Worldwide Logistics; and air and freight logistics provider SEKO Logistics.
The Port of Hamburg could suffer a container pileup if labor issues are not resolved in Germany.
The suspension of talks between the International Longshore and Warehouse Union and the Pacific Maritime Association is not the only labor issue in the pipe of trade.
Another one looms.
The terminal operators union is threatening to strike over pay and increased work requirements. An apparent labor slowdown can be tracked by the flow of containers.
SONAR’s Ocean TEU volume Index shows the continuous drop in the departure of vessels.
Crane Worldwide Logistics data shows there are more than 20 vessels in waiting position for discharge at the Port of Hamburg.
Andreas Braun, EMEA ocean freight product director at Crane Worldwide Logistics, told American Shipper that the coordination between terminal operators and intermodal operators is getting worse.
“We expect further worsening in the ports of Germany to come,” explained Braun.
The Port of Hamburg is known as the “Gateway to the World.” The largest seaport by volume in Germany, Hamburg is the third-busiest port in Europe and the 15th largest in the world. Bottom line: This port matters.
The container pileup has only been exacerbated by Russia’s war on Ukraine. Containers need to be opened and Russian-banned products need to be taken out by customs. This slows the processing of containers so they can be filled with European exports to the United States.
On top of that, the port also has suspended receiving export trains until further notice. The port listed the primary problem as “fully occupied entrance rail tracks, delays of trains departing from Hamburg, reconstruction works, and irregularities and limitations in the external infrastructure.”
This labor strife is the fourth horseman of logistical uncertainty, galloping along with the stalled negotiations between the ILWU and the PMA, the impending container surge after Shanghai reopens and peak season.
Travel time from Hamburg to the Port of New York and New Jersey is already ticking up.
American Shipper was first to warn about the empty container worries of European logistics companies. Logistics companies have already started telling clients about the issue.
When asked about the logistics companies’ worries, Port of New York and New Jersey Executive Director Bethann Rooney recently commented, “We are encouraging the ocean carriers to deploy sweeper vessels to evacuate large numbers of empty containers. Sending the empties to Europe rather than back to Asia would benefit the Port of New York and New Jersey, particularly if the sweeper vessels can immediately return for a subsequent voyage to pick up the next group of empties.”
But as we have seen with carriers’ preference in sending export empties back to China instead of moving U.S. loaded exports, will the carriers do what Rooney suggests? This makes perfect sense but the almighty dollar has been swaying good judgment.
“Once the backlog in China on the Far East westbound trade will be cleared, the congestion situation in front of the NWC (North West Continent in Europe) ports and the container availability will become worse,” warned Braun. “Shipping lines already have problems planning their exports based on the inflow of their containers on the import side. Shippers need to be prepared that rollings will increase and prebooking windows will be extended.”
The rejection rate is already creeping back up.
The flow of trade rests in the hands of the labor unions. Container processing and port productivity are key indicators of this.
Unfortunately, we are in a climate of no compromise.
Winston Churchill once famously said about World War II, “Never let a good crisis go to waste.” While something positive was created (the United Nations), that quote is now normally associated with negative actions of grandstanding and intentional selfish actions.
The chapter of this pandemic story is still being written. The pen is in the hands of the trade participants. Right now the story is a cliffhanger, adding additional uncertainty for logistics managers to navigate.
A new tracking analytic uncovers the undercurrents within the flow of trade.
There are many byways and highways in the flow of trade. Unfortunately, “zero-COVID” restrictions and lockdowns have either backed up these access ramps or clogged up the roads. That’s the obvious impact.
But there is a multitude of undercurrents within the flow of trade that influence capacity and productivity. In a first-of-its-kind logistics and maritime data project, CNBC debuted its Supply Chain Heat Map, where all facets of the supply chain are tracked to highlight these undercurrents.
The CNBC Supply Chain Heat Map comprises real-time data from FreightWaves’ SONAR rail and truck data; global freight booking platform Freightos, creator of the Freightos Baltic Daily Index; logistics provider OL USA; supply chain platform Blume Global; third-party logistics provider Orient Star Group; marine analytics firm MarineTraffic; maritime visibility data company project44; maritime transport data company MDS Transmodal UK; ocean and airfreight benchmarking and analytics firm Xeneta; Sea-Intelligence ApS, a leading provider of research and analysis, data services and advisory services within the global supply chain; and air and freight logistics provider Seko Logistics.
Two of the undercurrents highlighted in the map are the tightness of containers out of Qingdao and Ningbo, China. Another is the continued constrained trucking capacity in Shanghai.
“If trucking is limited and cannot transport the raw materials necessary for production, that impacts the volume of product that is available for transport,” said Alan Baer, CEO of OL USA. “If I am not able to secure a container so it can be loaded with product or get that container placed on a vessel, that slows down the supply chain. The choice of the destination port is also critical.
“Every piece within the flow of trade matters. It is all connected.”
Shanghai’s government has pledged the city’s reopening will be “phased in” with hopes of returning “to normal” by mid-to-late June. But what exactly is “normal?” Nothing is normal in this pandemic.
Over the past seven weeks, we have seen various forms of “reopening” by the Chinese government, and the results have been far from normal. Factories open only to shutter days later because of the lack of trucks available to transport raw materials.
Seko’s Jasmine Wall, general manager of growth, marketing and communications for the Asia Pacific, told American Shipper, “Some members of staff have received permits to leave their homes to go shopping with a two-hour permit, but the majority remain under full lockdown.
“One of our longest serving members of staff has now been in home lockdown for 72 days (their building was locked down before the official closure of the city) with still no hopes of a shopping permit due to there still being positive cases in their building. … So, this ‘gradual reopening’ greatly depends on the number of cases in your area/building.”
The heat map tells the truth about the movement of containers. Until people return to work, the dwell times being tracked by project44 will continue to climb.
Shanghai is not alone in the increased dwell time of containers. The Port of Yantian is also experiencing some hiccups. The dwell time of both exports and imports continues to tick up after a tugboat collision with a bunker barge on May 17. This has created ongoing disruptions to operations for 13 berths in Yantian.
US Supply Chain Heat Map
In the United States, the Port of Oakland is experiencing the most delays in both vessel turnaround and container dwell times. Warehousing and trucking capacity were cited by the port as reasons behind the slowdown.
At the Port of Los Angeles, dwell times for imports continue to tick up. One of the reasons for the increase? The rails.
“Rail boxes are waiting more than six days to get on a train,” explained Gene Seroka, Port of Los Angeles executive director. “That’s triple the dwell time compared to pre-pandemic days. Rail volume is up sixfold since February.
“We need more rail assets in place at America’s busiest port complex. It’s important that all stakeholders redouble efforts to maximize rail cargo off our docks and into the domestic economy.”
BNSF and Union Pacific both serve the Port of Los Angeles. BNSF has been embroiled in a labor dispute over its attendance policy for months.
According to Greg Regan, president of the Transportation Trades Department, AFL-CIO (TTD), around 1,000 workers have resigned since February. In a recent meeting, Union Pacific updated the Surface Transportation Board that it has met almost half of its 2022 goal to hire 1,400 new train crew members.
FreightWaves SONAR shows the declining intermodal volumes in most major lanes. The steepest decline is in the outbound LA lanes.
“The LA-Chicago lane is one of the most imbalanced,” explained Mike Baudendistel, head of intermodal solutions for FreightWaves. “On average each day, about 2,500 intermodal containers of all sizes travel in the LAX-CHI lane (left chart), virtually all of which are loaded.
Meanwhile, about 1,900 return back to LA from Chicago, of which about 500 are repositioned empty.”
As a result of the sloth-like movement of trade on the West Coast coupled with the ILWU labor talks and the threat of a strike, logistics managers are looking for port alternatives. Both the East Coast and Gulf Coast ports have seen an increase in trade. Even with the increase in container volume, the Port of New York and New Jersey has chipped away at both its export and import container dwell time.
Pervinder Johar, Blume Global’s CEO, told AmericanShipper when Shanghai opens up from its COVID lockdown, the West Coast ports are going to once again experience a significant increase in volume.
“I believe that though we have seen improvement in the flow of freight from ports nationwide, that may be short-lived,”Johar said. “Congestion on the West Coast has been trending in the right direction for weeks, but if this sudden influx of activity from Shanghai to the West Coast occurs in conjunction with any sort of labor action at the ports, that progress will be disrupted.
“This ramp-up in shipping will coincide with negotiations between the ILWU and the PMA. We are already seeing some front loading, with Asian manufacturers shipping out goods early to mitigate predicted port congestion. Instead of routing through West Coast ports, more of these shipments are heading to ports on the East Coast, simply shifting capacity issues from West to East.”
The buildup in waiting TEUs off of Savannah, Georgia, is an indication of such demand.
“In Week 19, the port saw an average of two container vessels, equaling 20k waiting TEU capacity,” said Alex Charvalias, general manager of MarineTraffic. “In Week 20, there was an average of 13 container vessels, equaling 100k-plus waiting TEU capacity.
“Given this major increase of waiting TEU capacity week over week, we’re estimating that waiting times at port will increase by 100% to an average of three or more days.”
The Port of Charleston, which has seen its own share of congestion woes, has successfully chipped away at the delays over the past several weeks.
“There is a further drop in the number of container vessels from Week 19 at 1.8 days to Week 20 at one or fewer days,” said Capt. Adil Ashiq, executive for North America-West Coast at MarineTraffic. “The same positive impact is also seen with port operational times from Week 19 at 1.4 days to Week 20 at 1.2 days.”
Watch: Lori Ann LaRocco explains the Supply Chain Heat Map
The Port of New York and New Jersey’s outgoing and incoming directors discuss container migration, reliance on data and how they avoided problems plaguing West Coast ports.
The East Coast ports have become a big winner in the trade game as more logistics managers diversify away from the West Coast. The Port of New York and New Jersey is just one of the ports reaping the benefits of this container migration.
American Shipper recently spoke with outgoing Port Director Sam Ruda and successor Bethann Rooney on their assessment of these historic times and how Rooney will continue to bring all stakeholders together.
Port Master Plan impact
AMERICAN SHIPPER: Both of you have overseen the development and implementation of the Port Master Plan — a 30-year strategy set to guide the port’s growth and manage the expected increase in cargo volumes. Given the historic volumes of containers, how many years did this propel you in the plan?
SAM RUDA: “From a cargo demand and capacity perspective, the cargo volume increase over the last two-plus years has propelled the seaport about five to six years forward. Just isolating capacity, we need to be mindful that effective capacity has a number of moving parts.
“One important component of that is the current high-volume period has also come with sharp increases in dwell time of containers, both empty and full. This is not a development that you can plan for. To the degree that cargo volume remains elevated, capacity can be increased through corresponding decreases in box dwell.
“The supply chain, at least at present, remains in flux, and while there are early signs of a trend toward reduced dwell, it has not happened yet. Short term, this is where capacity gains can be found.”
BETHANN ROONEY: “In 2021, the seaport handled just shy of 9 million TEUs. The Port Master Plan 2050’s container forecast includes a high and a low forecast depending on whether our strategy is to focus predominantly on our local cargo market (low end — 12 million TEUs by 2050) or to push to maximize our share of the discretionary market in addition to the local market (high end — 17 million TEUs by 2050).
“During the master planning process, the Port Authority decided to develop the plan around maximizing our local share and capturing a moderate share of the discretionary market (14 million-15 million by 2050).
“With that in mind, in 2021 the Port of New York and New Jersey handled the cargo volume that had not been anticipated by the plan until closer to 2027. That meant seven years of growth without any time for the supply chain to prepare and make the investment in the links of that chain, from additional trucks, chassis and warehouse capacity to additional personnel resources to new operating models such as additional hours of service.”
Predictive trade platforms
AMERICAN SHIPPER: The paradigm shift in e-commerce has catapulted digital logistics, some say, by 10 years. Is there a need for more predictive trade platforms to quantify the anticipated amount of trade coming in?
RUDA: “Data is indeed king. But good data is emperor (or empress). The key here is that a lot of stakeholders in the supply chain require different data sets. But the data needs to be accessible and customizable with fewer discrete platforms.
“Technology is less of the issue. What needs to occur is that data dashboards need to be utilized in a way that drives more collective decision-making beyond individual or modal silos. A good portion of the data exists. It’s just not being efficiently deployed and used to drive collective decision-making.”
ROONEY: “There is power in data that collectively we need to harness. For some supply chain stakeholders, data is nothing more than information and transparency. To them, it is: ‘Where is my cargo and is it available for pickup?’
“We need to go beyond that.
“The true power that the data holds is in being able to use that information, the data, to improve planning and resource allocation. Dozens of predictive analytics scenarios, depending on where you sit in the supply chain, exist for how data can be leveraged to help optimize resources and provide vastly improved information and transparency.
“For example, one question that data might be able to answer is, ‘When is the most probable time to schedule my trucker to pick up the container based on the location of my container on the ship and historical crane productivity?’
“One scenario related to the discretionary market that we have discussed is, for example, using manifest information when the ship sails from the last foreign port to extract the volume of IPI containers by railroad and destination and providing that information to the Class I railroads well in advance of the vessel’s arrival, so that the railroads can plan the number of empty rail cars that will be needed and have them already spotted in the Port of New York and New Jersey when the vessel arrives.”
Council on Port Performance
AMERICAN SHIPPER: Sam, the Port of New York and New Jersey, along with other ports across the nation, have had double-digit growth. Despite being a landlord port, you have not seen the problems the Ports of Los Angeles and Long Beach have seen with the stakeholders not working as one for efficient trade flow. What has the Port of New York and New Jersey along with their stakeholders done to be so united? Is it the Council on Port Performance?
RUDA: “At nearly 9 million TEUs, cargo volume through the Port of New York and New Jersey comes with its own set of challenges. This is especially true when you are experiencing a global pandemic. Nevertheless, what works well here is that we have strong leadership across the supply chain stakeholders and modal providers. This includes the ILA (labor), the railroads (Conrail, NS and CSX), the NYSA, as well as the terminal operators, trucking industry, equipment providers and depot operators, to name a few.
“There is a long history of the Port Authority of New York and New Jersey playing an active role as a convenor. We did not need to create a new forum to deal with the pandemic.
“The Council on Port Performance has been in existence since 2014 and includes 18 different sectors of the supply chain. The only thing we changed was the frequency of the meetings, which moved to weekly for the first year of the pandemic.
“As cargo volumes rebounded, however, we identified the need for a more narrowly focused stakeholder forum which included the terminal and depot operators, trucking, equipment providers, rail, and labor, which met on a biweekly basis. It is really important to have a common platform for sharing and reacting to real-time information. This is the tradition at the Port of NY and NJ, and it is a major reason for our collective success.
“As a final note on this, the seaport also has a productive and ongoing engagement with our federal partners. More specifically, the Coast Guard, the Army Corps of Engineers, Customs and Border Protection and the Maritime Administration. There are so many moving parts to efficient cargo movement. But our federal partners are real partners and we work very closely with them.”
Watch: Lori Ann LaRocco interviews Sam Ruda
AMERICAN SHIPPER: Beth, you are the architect of this council. Can you talk more about the performance, efficiency imperatives as well as the environmental sustainability measures you and the stakeholders are working on?
ROONEY: “First, it is important to recognize that the council is set up to work in an advisory capacity only. The council does not have the authority to require or enforce the adoption of recommendations by individual stakeholders. The council’s bylaws cite that ‘the Council on Port Performance (CPP) functions in an advisory capacity to provide advice, counsel and recommendations on matters relating to improved efficiency and service reliability in the Port of New York and New Jersey.’
“I believe that the most significant accomplishment of the CPP, dating back to its founding, is the recognition by all stakeholder segments that if one part of the supply chain is not performing well, the entire supply chain — upstream and downstream — is affected.
“The CPP helped break down the traditional silos wherein each segment was focused on their performance only to the point of recognition that an issue in one link could affect the rest of the chain (and its ability to make money). Having a forum for entities that do not have a formal business relationship to collaborate, communicate and coordinate allows each entity/segment to consider the upstream and downstream effects of a business decision that was traditionally made with blinders on.
“Now, decisions in one sector are made with a more holistic view of the entire gateway and with an understanding that when one segment does well, they all do well. Everyone is on the same team working for the good of the whole.
“That is not to say that all decisions made by individual sectors or entities are always welcomed by the other sectors and that there is never any conflict, but there is at least a dialogue in advance and consideration given to the rest of the supply chain.
“Currently, the council is focused on two key issues: 1) Long-dwelling imports and the need to have them removed from the container terminals to off terminal container yards, and 2) the evacuation of empty containers and the availability of empty container return locations.
“While the CPP does not address sustainability explicitly, improvements to efficiency and service reliability will have a positive impact on sustainability.”
Looking back and looking ahead
AMERICAN SHIPPER: Sam, you have worked at the Port of New York and New Jersey since 2015. What would you consider your biggest accomplishment?
RUDA: “The first is that the Port Department staff at the Port Authority is as engaged with our tenants as we have ever been. And this, in turn, develops into a productive two-way dialogue that collectively moves the needle in the right direction.
“The second accomplishment is leading the seaport through the COVID pandemic. As an industry that was deemed ‘essential’ for all the right reasons, keeping the cargo moving was key. But of higher importance was keeping the cargo moving while also keeping the front-line workers safe and healthy.
“Very early in the pandemic, I was not going to allow this port to be at the mercy of PPE handouts. We developed our own supply lines, and it was a shared and collaborative effort.”
AMERICAN SHIPPER: Beth, are you expecting in the coming months more TEUs coming your way as a result of logistics managers choosing the East Coast in an effort to circumvent any disruption or slowdown because of the ILWU negotiations?
ROONEY: “All indications are that we have been and will continue to see containers that would have otherwise moved over to the West Coast, but in fear of the ILWU negotiations, have shifted their volume to our seaport (and other U.S. East Coast ports).
“It is nearly impossible to accurately forecast the volume that is expected to shift to the East Coast, but in conversations with ocean carriers, shippers and beneficial cargo owners, the shift appears to be more proactive than was experienced in the early phase of the last set of ILWU negotiations.
“We have heard several examples of shippers who typically transport their products that originate in Asia through San Pedro Bay ports to warehouses in or around the central coast of California. They are now using the all-water route to our port and then land-bridging back to California, which is currently faster, cheaper and more reliable.”
AMERICAN SHIPPER: Multiple logistics providers in Europe are concerned the shipping delays coupled with the blank sailings has eaten into the supply of empty containers. What is your outlook as we navigate this uncertainty all stemming from “zero COVID”?
ROONEY: “There is no shortage of empty containers needed to support the Port of New York and New Jersey’s export market. We are encouraging the ocean carriers to deploy sweeper vessels to evacuate large numbers of empty containers. Sending the empties to Europe rather than back to Asia would benefit the Port of New York and New Jersey, particularly if the sweeper vessels can immediately return for a subsequent voyage to pick up the next group of empties.”
AMERICAN SHIPPER: The high freight rate has attracted five new entrants that are not engaging in reciprocal trade. Bal Shipping only transported 45 loaded U.S. exports last year. All the other entrants, including the Alibaba-backed Transfar, did not fill their vessels with loaded U.S. exports. Have you spoken with Transportation Secretary Pete Buttigieg on these new entrants?
ROONEY: “Of the new entrants, the Port of New York and New Jersey has only seen activity from three of five new entrants: Transfar, X-Press and Lihua. The first one didn’t start to call our port until August 2021.
“Given that these carriers entered the U.S. market to help pick up the extra inbound volume, it is not surprising that they did not fill their vessels with loaded exports. I believe there are a variety of reasons for that, including that the U.S. exports had service contracts with other carriers.
“Given the entrance late in the year, time is also needed for the containers to cycle through and be available for export. From August 2021 through March 2022, those three carriers have imported just 5,208 TEUs into the Port of New York & New Jersey. During that same time, those three carriers have exported 2,049 TEUs or 40% of the import volume — dramatically more than in other U.S. ports.”
China and the eventual surge in containers
AMERICAN SHIPPER: How concerned are you about China’s “zero-COVID” policies and the anticipated surge in containers that will follow?
ROONEY: “Undoubtedly we will experience a hockey stick-style surge beginning approximately six to eight weeks after the reopening in China. Import containers originating in China represent 29.6% of our total imports, which pales in comparison to the China market share in the combined Ports of Los Angeles and Long Beach, where it is more than twice as much.
“Hence, the effect will not be as significant here as it will be on the West Coast. Nonetheless, if we are unable to reduce the amount of long-dwelling imports and empties in the next several weeks, the surge will be very difficult to handle.”
Bubbles and thinking big
AMERICAN SHIPPER: The ports around the world work in bubbles. The World Bank and the United Nations Conference on Trade and Development have spoken about the need for global customs, a more transparent digital platform for more efficient trade. How can these multitude of bubbles pop in order to achieve data sharing so trade can be tracked, traced and moved efficiently?
RUDA: “I remember something that the late Bruce Seaton (former head of American President Lines) said about this industry. I am paraphrasing here, but he effectively said that the shipping industry is about efficient handoffs of the cargo (the container).
“While the industry was born right here at Port Newark, it has evolved in ways that ensure less efficiency in these cargo handoffs. This, ultimately, is the core problem that needs to be solved. Anything that simplifies, adds speed, reduces duplication of effort will add value toward streamlining this age-old bubble issue.”
ROONEY: “The concept of a centralized information system for global trade gives me great cause for concern. While technology and data platforms have the potential to help improve transparency and efficiency, those incremental benefits need to be carefully weighed against the risks of cybersecurity — namely data protection and the associated confidential and proprietary information that could be compromised.”
AMERICAN SHIPPER: Sam, how does the U.S. tackle its own bubbles?
RUDA: “I recently hosted a Q&A with Secretary of Transportation Buttigieg in Washington. …. I asked the secretary what he would like to see from U.S. ports. His answer was spot-on. He said, ‘Think big.’ Old problems require new solutions. And this is what makes this industry so interesting and fascinating.”
When it comes to lifting lockdowns in China, false hope will remain the norm.
Another week — and another pledge that the lockdown in Shanghai may be lifted. It’s not the first time this has been announced.
And it won’t be the last.
The city’s vice mayor, Wu Qing, said at a news conference Thursday that there would be an “orderly opening, limited [population] flow and differentiated management.” Yet, no date has been set.
How many times do these false alarms have to be stated? “Actions speak louder than words” applies to this situation. The government’s actions are not reflecting the rhetoric that officials are putting out.
Anyone who has been reading the logistics reports knows the truth. The message is simple: The Chinese government, not the local level, is in control of the flow of manufacturing and trade.
Crane Worldwide Logistics informed clients in its Thursdayupdate: “For export, we still need to check with suppliers whether their local government allows container drayage or trucking service with truck drivers from Shanghai; or whether they can send cargo to our warehouse in Shanghai. We need to coordinate with the consignee for the document turnover and delivery schedule case by case for import.”
Worldwide Logistics offered a wide breakout on the “zero-COVID” status and impacts across the country to customers.
“We can see the Shanghai pandemic situation is trending towards a good prospect steadily,” the company said. “However, in some areas like Tai cang, Zhang jia gang and Chang shu, the COVID cases figure is rebounding, which causes the problem of cross-city delivery and containers stuffing. It should still take some time for the cross-city transportation to recover to the normal. The whole market is still impacted by the COVID situation, and the recovery depends on when the pandemic situation can be totally controlled in the country.’
Seko Logistics informed clients on Friday, “Trucking in and out of Shanghai requires a traffic permit, which is only valid for 24 hours and only on specific routes. Even with this arranged, it is possible for booked trucks to be commandeered by the government to transport aid supplies.”
This comment after China saying it has increased the list of companies that can reopen under a “closed loop system “ to 2000. The lack of ability for trucks to deliver raw materials into these “closed loop” companies has impacted companies like Tesla, which had to stop production.
Now the government is trying to help.
The insanity of this situation has created a dense fog, making the logistics planning picture beyond murky. The obstruction created by Shanghai has gummed up vessel schedules.
American Shipper reviewed a booking confirmation from Oakland, California, to Great Britain where the booking was on its 60th update. The estimated delivery went from late May to late June.
Once the roads are truly open and products can be completed and transported, a flood of containers is expected to arrive in the United States, at least a month or two after a real opening.
“Right now, the Trans Pacific Eastbound market reminds one of being in the eye of a hurricane,” said Alan Baer, CEO of OL USA. “Blue sky, available space and moderation of pricing. However, soon enough the 100 miles per hour wind and rain could be battering supply chains all over again.”
No slicker or umbrella will protect the fragile U.S. logistics system when this container storm hits. The problems plaguing the Port of LA and Long Beach are still there, no matter what messaging we hear from the Biden administration on improvements.
The dwell time of the containers, and the continued long line of vessels waiting for berth, are a physical reminder of the inefficiencies.
China’s zero-COVID policy is a prescription for more inflation and supply chain “illness.”
No matter how “open” the Chinese government has said Shanghai is, the flow of trade is telling otherwise. The reality is quite simple: Shanghai’s supply chain is sick.
The diagnosis is based on the volume of trade being moved and produced. Trade takes people working throughout the entire supply chain. That is not happening.
Below are FreightWaves SONAR charts that take a real-time temperature check on the Shanghai trade route.
The first shows container dwell time at the Port of Shanghai. Sure, it’s great you can get your product in a container, but you will have to wait more than 10 days for it to get loaded on a vessel. A container at rest is not making money.
Once the container is out on the water, it has to wait yet again once it arrives at its destination port. The Port of Los Angeles receives the most containers from Shanghai, which is why only Los Angeles is shown on the SONAR chart below. Notice another nine-plus days of waiting. More time is being lost.
So what does this all mean? It points to a massive drop in exports from Shanghai to all U.S. ports.
The weekly shipments from the Port of Shanghai to the Port of LA resemble a ski slope. There’s nothing healthy here.
Now, while some trade has been diverted to Ningbo, China, it’s not a cure. We know congestion will follow in Ningbo as a result of the elbow in the trade plumbing.
China’s zero-COVID policy is a prescription for more inflation and supply chain illness. The prognosis will not change until the remedy being hailed as a cure is no longer prescribed.
For more information on SONAR — the fastest freight-forecasting platform in the industry — or to request a demo, click here.Also, be sure to check out the latest SONAR update, TRAC— the freshest spot rate data in the industry.