How to win the trade game: NY/NJ port directors explain their success

Container ship in New York City.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.

Container ship in New York City.

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, outgoing director, Port of New York and New Jersey.
Sam Ruda (Courtesy of Port of New York and New Jersey)

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.”

Bethann Rooney. (Courtesy of Port of NY and NJ)

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.”


SONAR chart with data on Port of New York and New Jersey.
According to SONAR data, the Port of New York and New Jersey has gained market share in terms of shipment counts clearing customs, while the Ports of Los Angeles and Long Beach have faltered. 

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.”


Project44 data.

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?


New ocean entrants data.

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.”

Viewpoint: Shanghai’s reopening pledge nothing more than the boy who cried wolf

COVID workers in Shanghai.When it comes to lifting lockdowns in China, false hope will remain the norm.

COVID workers in Shanghai.

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 Thursday  update: “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.’

(Courtesy of Worldwide Logistics)

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.

More from Lori Ann LaRocco

SONAR charts check temperature of Shanghai’s ailing supply chain

What can go wrong next in China? Now there’s a lockdown in Zhengzhou

SONAR charts check temperature of Shanghai’s ailing supply chain

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.

What can go wrong next in China? Now there’s a lockdown in Zhengzhou

Supply chain woes in Zhengzhou, China.Trucking solutions, sitting cargo are among the issues in Henan province’s capital city.

Supply chain woes in Zhengzhou, China.

After COVID cases were identified at the Zhengzhou railway station, the capital city of China’s Henan province is in lockdown for at least the next seven days. 

Yep, just what the supply chain needs when these exports feed out of Shanghai — which is already at a miserable pace.

Jasmine Wall, commercial manager for Asia-Pacific at Seko Logistics, tells American Shipper, “Currently, 80% of full trailer-load, point-to-point pickup-to-port requests can be fulfilled if picking up from the east of Shanghai. But the factory must do container loading by themselves.”

That’s the positive.

“If.”

The contingencies to get trade flowing within Shanghai are still challenging.

“For some heavily controlled areas, such as Kunshan/Changzhou, there is still no trucking solution, and no cargo can be picked up or delivered,” Wall said. “Although factories in these areas can apply for traffic permits, it remains quite difficult for them to be obtained at the moment.”

Hiring spree stopped

Kunshan, a manufacturing hub of industrial and auto parts, is home to Foxconn, which had to abruptly stop an announced hiring spree just 24 hours after it was rolled out in the region.

Recently, Li Auto announced, “The COVID-19 resurgence in this area has incapacitated some suppliers in Shanghai and Kunshan. Some of them completely shut down production or delivery of their products, making it impossible for us to maintain production after exhausting our parts inventory.”

The plumbing of manufacturing and logistics has become disjointed.

“The situation is very fluid and different local governments are changing regulations,” explains Keith Winters, CEO of Crane Worldwide Logistics. “In some areas of Shanghai, trucks and drivers are being blocked, while some are allowing trucks to enter under the precondition that the factories can get a truck permit from their local government authorities. 

“The holidays in China this week have further exacerbated the situation”

Concern in earnings calls 

It’s this supply chain sluggishness that has been the subject of concern in the majority of first-quarter earnings calls. 

Nick Raich, CEO of The Earnings Scout, tells American Shipper it is one of the reasons behind his overall bearish outlook for the second half of 2022 for earnings and stocks in general.

“A vast majority of companies cited inflation and supply chain disruptions for shrinking profit margins,” Raich says. “Until these two factors abate, the second half of 2022 earnings expectations are at risk of being drastically reduced, especially as the Federal Reserve raises interest rates in a decelerating growth environment.”

At the request of American Shipper, project44 broke out the weekly shipment delays from Shanghai to the West Coast.

The clock starts on these shipments when the container is placed on the vessel. Port productivity at the Port of Shanghai and the destination ports are the reasons behind these results. Long Beach has seen the largest decrease in delays in recent weeks.

On the East Coast, even with the increase in vessel anchorages, containers from Shanghai are coming into port in a timely manner. It’s just one of the reasons why the East Coast has become a choice for logistics managers.

As logistics managers look for route solutions to make up for time, it does not change the vulnerability to “zero-COVID.” 

More from Lori Ann LaRocco

Viewpoint: China COVID policies to squeeze flow of European exports to North America

The real victim of Shanghai’s COVID lockdown? Intra-Asia trade pipeline

Russian oil heading to storage in South Africa

“The only reason for an oil tanker to go to Saldanha Bay is to unload the oil into storage,” says an industry consultant.

Two supertankers loaded with Russian oil are en route to a storage facility in South Africa.

The Searacer and Elandra Denali, each carrying about 2.1 million barrels of oil, are headed to the Port of Saldanha, a hub for crude oil storage, according to Argus. American Shipper has verified the destinations through MarineTraffic.

Andy Lipow of Lipow Energy Associates tells American Shipper the only reason for vessels to berth in Saldanha is to store oil.

“This shows you the sanctions are having a real effect on Russia’s ability to sell their crude oil, and we are now seeing Russian crude oil go into storage,” Lipow said. “The only reason for an oil tanker to go to Saldanha Bay is to unload the oil into storage.”

Lipow said the oil markets are keeping an eye on other “out of the ordinary” tanker voyages, such as from the Netherlands or Gibraltar to the Caribbean.

“There are numerous storage locations in the Caribbean,” Lipow said. “St. Croix, Bonaire, St. Lucia, St. Eustatius and Curacao are important oil storage hubs for producers and traders.” 

The Caribbean served as a safe haven during the 2009 crude price collapse and the 2015 crude crash.

Viewpoint: China COVID policies to squeeze flow of European exports to North America

Containers in Shanghai.China’s zero-COVID measures will make it harder for European exports to reach the East Coast because empty containers aren’t getting where they’re needed.

Containers in Shanghai.

China’s zero-COVID measures are producing another problem in trade. Logistics providers in Europe told American Shipper they are concerned about an impending empty-container-supply crisis. A bitter combination of blank sailings and an increase in delays of Europe-bound shipments from China have created a cocktail of capacity constriction.

“You need imports to have containers for exports,” said Alexander Geisler, managing director, German Shipbrokers’ Association (ZVDS). “The whole system only works when you can put a container six to seven times on a ship in a year. Therefore, you have to reduce the dwell time in the ports and at the inland terminals.”

The drop in twenty-foot equivalent units from Europe to the U.S. East Coast can clearly be tracked.

‘A lack of empties’

As a result of the decrease in TEU capacity from the Far East to Europe, logistics companies have fewer containers for clients to fill their products bound for the East Coast.

“Vessels are slowing Asia and there is a lack of empties,” explained Anne Brouwer, director of operations at TOC Logistics. “We are very concerned about the impact on availability of empty containers for European exports to North America’s East Coast.”

 Project44 details the delays in shipments from China to Europe.

“Although the Port of Shanghai has remained open throughout the lockdown, leading to very little port congestion, the shuttering of China’s manufacturers means that export shipment delays will persist for weeks, if not months, to come,” said Josh Brazil, SVP of supply chain insights for project44.

Alan Baer, president of OL USA, said his Hamburg, Germany, office pinpointed the container shortage leading to canceled bookings out of Europe.

“All the capacity is booked, no matter what the rate is,” Baer said. “I have been told there are approximately 60,000 TEUs waiting on 10 large vessels off of Hamburg. They say you cannot book for June because it is too early. But if you book for the end of May, there is a possibility of being rolled to June. I am told this is the craziest time they have ever seen.”

Waiting for the cork to pop

With testing expanding to the largest district in Beijing and COVID cases increasing there, the immediate future offers few positives. Dozens of buildings are already under lockdown; if more are added to that list, logistical restrictions are likely to follow.

“Until the ‘zero-COVID’ cork is popped, the logistics picture will continue to be cloudy,” said Richard Strong, director of account management at TOC Logistics.

The pressure of that cork inhibiting the free flow of trade in Shanghai is building at other ports, which will further impact the Europe-to-U.S. trade. The flood of canceled sailings to Shanghai and the rerouting of trade to Ningbo are creating delays.

“An increasing number of blank (or canceled) sailings and/or an increase in delays in Chinese ports in particular will undoubtedly result in a reduction in the number of boxes being moved into Europe for discharge, and therefore down the line the European export to NAM (and other areas as well) will have a deficit in available empty containers,” explained Niels Madsen, vice president of product and operations at Sea-Intelligence ApS.

“This may however be both good and bad for North America, since less containers from Europe may assist to ease up the congestion currently experienced in North American East Coast ports, which will assist US importers in receiving congested cargo faster. On the downside, less containers in import from Europe may then have the effect of less empty containers available for North American East Coast exporters. But that is a couple of months down the line.”

This inevitable container restriction will not only hit European exports but fuel the flames of inflation as the price of these coveted boxes will only go up.

The real victim of Shanghai’s COVID lockdown? Intra-Asia trade pipeline

The supply chain impact in Shanghai is being felt across Asia.The movement of materials and finished products between China and its key Asian suppliers is taking a big hit — and the ramifications will be felt around the world.

The supply chain impact in Shanghai is being felt across Asia.

The slothlike trade moving out of Shanghai has created a short supply of raw materials traveling on the all-important intra-Asia trade route. Countries that make up this trade pipe — Vietnam, Malaysia, Taiwan, Japan, Korea, Indonesia and Cambodia — have factories waiting on crucial raw materials needed to finish goods ranging from apparel and footwear to furniture.

This pipeline saw an expansion in the trade as more American importers diversified their manufacturing out of China as a way to work around the China tariffs. 

But what this pandemic has revealed is even with this “manufacturing diversification,”  the dependency on China has never been fully severed. Major raw materials such as jute, cotton, silk, wool and manmade fibers used by the textile and apparel industry are sourced in China. 

These raw materials are components in yarns, fabrics, fasteners, threads, pockets, shoulder pads and waistbands. In addition, trimmings (buttons, zippers, etc.), leather and rubber soles (for shoes) are made in China and transported to intra-Asian factories. 

Thus, if a box of zippers is on the floor of a closed Chinese manufacturing plant or a part of the “lucky” 666 and a truck can’t pick up that box due to restrictions, the consumer is out of luck.

“We fear that the Shanghai lockdown is impacting the intra-Asian business more than Asian exports,” said Peter Sand, chief shipping analyst at Xeneta.

Data details lack of demand

Data from Xeneta shows the drop in the short-term contracts of containers on the intra-Asia trade. Pricing is a reflection of demand — or in this case, the lack of demand.

“Not only are we worried about slowdowns in major production centers and at the world’s busiest ports, we are worried about the impact of lockdowns on the movement of both materials and finished products between China and other key Asian supplier countries,” said Nate Herman, senior vice president, policy, American Apparel & Footwear Association.

In addition to critical finishing products, chemicals are transported. Jeremy Pafford, head of North America, market development, Independent Commodity Intelligence Services, tells American Shipper one example is the chemical material used in making clothes is polyester yarn. 

“Because of the shutdowns, polyester yarn inventories in China have surged as factories that would use the yarn have shut down,” Pafford said. “That has helped pressure regional prices downward up to 10% in some regions and sets up a need for polyester yarn producers to lower operating rates if more textile factories don’t reopen soon.”

Pafford said because China is the chemical manufacturing hub of Asia, the shutdowns have direct effects on producers and buyers in adjacent regions.

“These shutdowns bring a loss of demand and lower chemical prices regionally at a time when upstream costs for feedstock crude oil and natural gas are high,” he said. “Producers in the supply chain are facing pressures.”


More from Lori Ann LaRocco

Shanghai’s disruptive impact on the summer supply chain

‘Shanghai Surprise’ — and a new lockdown to worry about

Viewpoint: Shanghai’s disruptive impact on the summer supply chain

Shanghai's zero-COVID lockdown continues.Zero-COVID policies seem effective only in creating widespread supply chain disruptions.

Shanghai's zero-COVID lockdown continues.

The hairball snarling the flow of trade in Shanghai is growing. 

Just as I warned on March 24, this lockdown will have a significant impact. The longer the delays, the greater the impact on U.S. inventories in the coming weeks. We have seen this horror show before and we all know the containers that are currently piling up will eventually make their way to the United States, creating massive congestion. 

Besides technology products, furniture and auto parts, there are seasonal items in these containers. American Apparel and Footwear Association CEO Stephen Lamar tells American Shipper this is the traditional time when U.S. retailers import their summer merchandise. 

While some retailers may have started bringing in summer items earlier this year after last summer’s congestion, the delays happening now will only hinder the supply chain.

“With more than two years of managing COVID-19 while keeping operations open in the U.S., we are eager to see the Chinese deploy these learnings as well,” Lamar says. “Zero-COVID policies seem effective only in creating supply chain disruptions that extend far beyond China’s borders. 

“We need healthy supply chains and healthy trading relationships now more than ever.”

SONAR tracking

SONAR tracking of the inbound ocean volume of twenty-foot equivalent units shows how the combination of Lunar New Year and lockdowns have had an impact. 

Project44 breaks down the container crunch. The length of time of containers dwelling is increasing as a result of the lack of manpower.

The continued dramatic drop in shipments from Shanghai specifically just shows ports declared “open,” yet trucks and warehouses still need to be operational to move trade. With 90% of trucking capacity sidelined, according to Seko Logistics’ latest update to customers, what would you expect?

American Shipper pulled the bills of lading from February to last Wednesday to see what types of summer items have arrived from Shanghai. Pools for Walmart, infrared saunas, camping gear like sleeping bags and tents, patio furniture, bicycles, and even golf carts have been moved by ocean freight.

“The ongoing COVID-19 lockdown issues in China continue to create additional supply chain disruption for U.S. retailers,” says Jon Gold, vice president of supply chain and customs policy for the National Retail Association. “The impact is being felt across the supply chain from factories to ports. 

“Ongoing challenges include factories struggling to get materials needed for production, difficulty moving products to the ports in part because of the driver shortage, as well as increased consumer demand. While the impact of the Shanghai lockdown is limited right now, it will grow the longer the restrictions are in place.”

Now the zero-COVID measures are extending to manufacturing hub Guangzhou. These lockdown contagions may be hailed as a “cure” in China at combating the virus; unfortunately, they’re also  destroying the health of the global supply chain.


More from Lori Ann LaRocco

Viewpoint: ‘Shanghai Surprise’ — and a new lockdown to worry about

Shanghai’s 2-stage COVID lockdown may make getting containers ‘almost impossible’

Under attack and low on supplies, 1,500 seafarers trapped in Ukrainian waters

The Azburg was sank by two Russian missiles.Relief efforts are ‘proving extremely challenging’ for those stuck on 140 vessels in the conflict zone.

The Azburg was sank by two Russian missiles.

The Dominica-flagged cargo ship Azburg that sank in the port city of Mariupol after being hit by two Russian missiles Tuesday is an example of the growing humanitarian crisis facing some 1,500 seafarers on vessels trapped in Ukrainian waters.

In an interview with American Shipper, Natalie Shaw, head of employment for the International Chamber of Shipping, noted that people representing 20 nationalities are stuck on approximately 140 vessels in the conflict zone. These men and women, she says, have little to no accessibility to replenishments of food, water, fuel and medical supplies.

“Delivering relief is proving extremely challenging.” Shaw says. “For some seafarers, supplies are running out. Some are nearing or are at the end of their onboard supply.”

Shaw said the vessels have limited amounts of provisions and basic necessities, such as washing powder, toothpaste and soap.

“There is an urgent need to replenish these provisions across the stuck vessels,” she adds.

Two seafarers killed

According to shipping officials, two seafarers have been killed and five merchant vessels have been hit since Russia’s attack on Ukraine. 

Asked if evacuating the seafarers was possible, Shaw notes: “We are supporting efforts to finding a solution and are looking at a range of options, but as the war persists these are harder and harder to realize. At this time, the seafarers are safest remaining sheltered on their ships.”

Shaw says carriers are very concerned for the seafarers.

“Vessels stuck in the affected areas continue to be vulnerable,” she stresses. “The International Chamber of Shipping, alongside other international shipping organizations, are working closely with U.N. agencies to support the seafarers and the efforts to relieve them. 

“We’ve already seen the tragic consequences of vessels and seafarers being caught up in the conflict.”


More on Russia’s invasion of Ukraine

Ship charter rates still ‘spectacular’ but war could tip the balance

Class I railroads donate over $2 million for Ukraine relief

Biden-EU energy pact: LNG shipping game changer or wartime hype?

More from Lori Ann LaRocco

2 tankers fill up with Russian oil after 45-day US countdown begins

Embargo of Russian oil now spreading to Kazakhstan

Viewpoint: ‘Shanghai Surprise’ — and a new lockdown to worry about

Truck at Shanghai's deep-water container terminal.China’s latest move announcing a phased-in exit of the lockdowns for the eastern part of Shanghai has logistics managers warning clients about the impact it will have on truck deliveries.

Truck at Shanghai's deep-water container terminal.

Just like the Sean Penn-Madonna flop, the newest “Shanghai Surprise” is also a bomb. 

China’s latest move announcing a phased-in exit of the lockdowns for the eastern part of Shanghai has logistics managers warning clients about the impact it will have on the truck deliveries of their products to both the airport and seaport. 

With the military moving in to test millions of civilians, the government of China is showing the world “zero COVID” is a policy it is not abandoning anytime soon.

On the heels of the massive testing measures closing down Shanghai, a city just south (Zhejian Haining) has shut down temporarily, launching a Level 1 emergency response, according to the WeChat public account of Haining Release. A strict three-zone management and control of sealing, control, and prevention is underway; meanwhile, schools and businesses will be closed, and Intercity rail, buses, taxis, and long-distance passenger cars will be suspended.

Steve Lamar, CEO of the American and Apparel and Footwear Association, told American Shipper that this area is a hub for garment and apparel manufacturing.

A spokesperson for Orient Star Logistics explained that “the COVID test measures and the restrictions reduce the truck supply. Yet, the bigger issue that we are facing is the restrictions for truck drivers going to surrounding provinces for cargo pickup. The local government checks the driver’s route of the previous weeks and would reject the entry if the driver visited any alerted area.”

Logistics black hole

This lack of clarity is creating a black hole in logistics planning.

In a recent note to clients, Worldwide Logistics wrote the situation is “still developing” with no reopening schedule announced. 

“The extent to how the production and shipping plan is to be affected hinges upon how long it will take to get this outbreak under control,” the note explained. “And obviously, we expect to see Chinese exporting volume may drop by around 30% in the following weeks, which will put downward pressure on the market spot rate. More freight of all kinds of space has been released by carriers to fulfill the vessel for the time being.”

The Pudong New Area, Fengxian, Jinshan and Chongming districts as well as parts of Minhang and Songjiang districts are included in this new phase in the plan.

Crane Worldwide Logistics alerted its customers of the hesitancy of cities to allow in drayage trucks from Shanghai. The company characterized the container drayage situation as “challenging” and airfreight as “almost impossible” because of the lack of labor.

Crane wrote that “there are not enough longshoremen in the port, so the efficiency for loading and unloading has been impacted. Both Waigaoqiao Port and Yangshan Port are congested.   

“For import: Import vessels’ waiting time for berthing will be longer.   

“For export: Some ocean carriers have announced vessel delays or are omitting Shanghai calling of some vessel/voyages, and some have announced blank sailings. A lot of clients have shifted to Ningbo port. Some carriers have started to allocate more space to Ningbo, but some have not actioned so swiftly.”

One step ahead of capacity

Keith Winters, CEO of Crane Worldwide Logistics, told American Shipper that given the fluidity of the situation, agility and flexibility are necessary. 

“Different provinces may have restrictions on cargo movement, therefore our teams are communicating daily what is accessible while following the governmental guidelines set forth with current lockdown protocols,” Winters said. “Crane Worldwide has operations throughout China and our best advice is to keep communicating and stay one step ahead of your capacity needs as this situation develops further.”

Akhil Nair, VP of global carrier management and ocean strategy at Seko Logistics, also echoed the same challenges. 

“Seventy percent of the Shanghai container business originates in other areas so drivers have to enter different regions, which means testing no older than 48 hours old is required,” Nair said. “With the lockdown, offices and warehouses are closed. 

“Our  CFS (container freight station) is closed from March 30 to April 5. This is a location where exporters drop off their products so they can be added to a container. These are small components which would normally not have their own container. With the CTS closures, these exports cannot be dropped off nor containers filled.”

The impact of these lockdowns and restrictions can be tracked by the amount of capacity waiting off port limits. MarineTraffic data broke out the capacity for American Shipper.

The disruption of these restrictions can be seen in the troughs. Shanghai’s waiting off-port limits capacity is the only port on an uptrend.

It’s important to remember logistics companies need to provide a realistic picture of the environment so their clients can plan. It doesn’t line their coffers with cash if they overblow a situation or undersell. 

This line from Worldwide Logistics speaks volumes: “There is a clear signal that the whole city may be shut down if the situation doesn’t get better.”

So grab some extra popcorn — this horror movie may be the first in a double feature.


Watch: What the vessel backlog means in Shanghai


More from Lori Ann LaRocco

Shanghai’s 2-stage COVID lockdown may make getting containers ‘almost impossible’

Viewpoint: It’s a tangled game of Twister for drayage in China