How a Lack of Containers in Asia affects U.S. Exporters

With all the coverage in the trade today about the tremendous surge in imports it’s hard to hear the voice of US exporters through all the noise. Despite this overwhelming attention and focus, an exporter might be wondering “why should I care about imports”? As we will point out there are many reasons and they can be summarized into three critical things that all US exporters should be aware of during this turbulent time. But before we get to that lets highlight a few of the market conditions that are in currently in play.

Ship Offloading Containers
Import surge
Short on Trade
Depressed US export demand
Capacity Management

Import surge – what is it and what does it mean? Despite the drastic drop in US import demand that started in the spring as a result of the COVID pandemic, imports have rebounded dramatically beginning in June. Among others this surge in demand has been driven by the following factors:

  • US Retail inventory restocking
  • High Demand for PPE Equipment
  • Start of the traditional import peak season
  • Rush to get product in before start of the Golden Week holiday beginning October 1st

All of this has led to a scarcity of equipment as carriers are prioritizing assets towards the Transpacific Eastbound trade. There is an incentive for them to do so with import rates at record levels nearing $4000 and higher to US West Coast ports and $4500 to the US East Coast. Inland rates to Midwest markets including Chicago, Cleveland and Kansas City are well over $5000. These levels represent an increase of over 190% from the same period last year. To contrast, export rate levels from the US West and East coast are under $400 for the return westbound trip.

Depressed US export demand – Due to effects of pandemic, exports have been impacted particularly in the aircraft and automotive sectors. Agriculture has also been negatively impacted as result of trade tensions between China and the US. This has led to a decreased volume of containers moving westbound to Asia and other markets.

Capacity Management – Ocean carriers are getting smarter with capacity management and have become quite adept at the tactical deployment of their assets in order to maximize their yield during this time of uncertainty.

So, what about the 3 critical things an exporter needs to know?

1. Free Time – it’s not free any more…. or at least not all of it

The days of 14-21 available free days at destination are going away.   Carriers do not want containers sitting in Asia for up to 3 weeks before they can load them for export to US or Europe. Carriers are making greater revenue on TPEB containers and want to turn equipment as soon as possible in order to take advantage of skyrocketing spot market prices. At only a fraction of the cost to move a container eastbound, carriers have little incentive to let containers sit idle in China when they can be turned for high level of profit.

2. Discontinued Midwest routings via the US East Coast

Domestic inland and port routing options are becoming increasingly limited. Carriers are exhibiting declining interest in accepting bookings with 60-day transit times via the US East Cost when a container can return to Asia in 2-3 weeks faster with a West Coast routing. Again, carrier asset management is smarter and they are displaying limited appetite for these slower and lower margin lanes.

3. Constrained Trucking and Chassis availability

Due to the large influx of import shipments, US Exporters are having to wait on trucking and chassis.  Delays are especially significant at USWC ports and inland rail ramps. Since container import free time is typically less than for exports, these loads are typically prioritized over export loads. Additionally, we are seeing truckers prioritize shipments for “shippers of choice” - those who make their loads easier, faster and pay a higher rate.

So, what can you do? We encourage the following.

  • Book in advance - Schedule loads at least 2 weeks in advance whenever possible
  • Provide advanced forecast information to your supply chain partners in order to secure and ensure tricking capacity and ocean equipment so that it is available when you need it.,
  • Schedule time to with your current logistics provider to understand the current market constraints and develop a plan together to overcome these challenges.
  • Need additional advice or help from our experts? Please contact Marc Van Gorp, National Export Business Development Manager or your local Laufer sales representative.