Market Conditions – Shanghai has officially reopened, but the jury is still out on whether the market will see any surge in volume as many have speculated over the last couple of months. Freight volumes are expected to rebound over the coming weeks and the timing will potentially coincide with the beginning of peak season shipments as we move through July. Ocean carriers blanked a considerable number of vessels out of China during the lockdown which did have some positive downstream impact for US ports providing them a chance to work through and process the vessel backlogs accumulated over the past several months. East Coast port congestion remains as NY/NJ ports and Savannah continue to face vessel berthing delays of approximately 7-10 days.
Rail dwell times at USWC ports grew over the last few weeks as processing of discretionary containers increased at ocean terminals. West Coast rail departure delays are now averaging upwards of 7-10 days. The US supply chain infrastructure remains quite fragile as US warehouses inventory levels increase and available labor to process freight remains below pre-pandemic levels. The faster processing of intermodal containers is severely impacting deliveries at final destinations throughout the US. Inland rail ramps including Chicago, Kansas City and Memphis are facing severe chassis shortages resulting in increasing demurrage accrual and additional accessorial costs. At Chicago rail ramps all major railroads are experiencing chassis shortages with some rail carriers beginning to stack containers making them inaccessible for delivery in the short-term.
We are expecting volumes to gradually increase as we move into July and Shanghai manufacturing ramps up along with consumer goods for the 2022 year-end holiday season beginning to ship. The big question is if the additional capacity gained from the easing of port congestion in the US will be enough to offset any Shanghai surge or peak season uptick? With the fragile state of US supply chain infrastructure once again experiencing severe chassis shortages, it will not take much to add another round of frustration for shippers later this year.
Market Rates – Container rates continue to face downward pressure as the combination of the Shanghai lockdown, growing US inventory levels and high inflation have importers reacting more conservatively with their purchase orders waiting until a clearer picture becomes visible in the market. Rates on charter carriers are seeing the deepest discounts as these carriers rely mostly on spot shipments versus the alliance carriers that sign long-term fixed rate agreements for a sizeable percentage of their weekly sailings as a hedge against market rate volatility. Alliance carrier rate levels are lower to both USWC and USIPI major rail destinations while USEC ports remain fairly flat versus May market rates. We expect West Coast port rates to remain under pressure until volumes rebound sometime in July, possibly as late as August.
Chassis Shortages Continue – The US market continues to struggle with a shortage of chassis even though imports have cooled off since the incredible surge experienced in 2021. As retailors slow deliveries for products due to a forecast indicating waning consumer spending, warehouses are slow to return empty containers since they simply don’t have enough overflow room to stack the inventory. As a result, ports and inland rail ramps are severely impacted with the situation varying by location. Dray carriers in certain markets are introducing a new accessorial line-item cost as they bill for “chassis pre-pulls” to avoid costly demurrage accrual. The chassis pre-pull costs are mostly impacting regions in the Midwest where dray carriers are routed to separate yards to procure bare chassis and then proceed to container rail yards to pick up the laden containers. Shippers are quite frustrated as they are carrying the cost in many cases to reposition another stakeholder’s asset.
Port Congestion Increases in NY/NJ and Savannah and Continues in PNW –Southern California ports finally see port congestion starting to fade with under twenty vessels delayed due to congestion., East Coast ports are seeing the vessel queues spike again in places like Savannah which now as two dozen vessels waiting to berth as of June 6th. New York and New Jersey ports are also experiencing a growing queue of vessels with approximately seventeen vessels waiting to berth.
Vessels are now lining up and down the Jersey shore and anchor locations off Long Island seem to be near capacity. With East Coast ports expecting strong throughput for the remainder of the year, the situation is not expected to improve anytime soon and quite possibly worsen through the summer months.
Port congestion at the US PNW port terminals continues and importers are experiencing long dwells on challenges accessing their import containers due to “closed areas.” Closed areas are another term for congestion within an ocean terminal. The terminal operator determines it is unsafe to access containers due to a vessel at berth un-loading or loading. We think in today’s market it simply means containers are in a stack - in other words, buried and not accessible for the short-term. We are seeing containers sit in closed areas for upwards of 7 days before becoming available for pick up. Again, this is a taking place during a lull in the market! What happens when market volumes pick up during peak season?