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Supply chain relief on the horizon for importers, exporters

Transpacific shipping demand down, cargo congestion easing at West Coast ports
Freighters at anchor in Vancouver harbour provide visual illustration of ongoing transpacific supply chain congestion | Chung Chow

Retailers and other businesses that depend on transpacific imports and exports could soon be swapping loses for wins in the supply chain waiting game.

Late summer data shows container shipping rates and container cargo bottlenecks dropping, along with pandemic-induced maritime goods movement backlogs and dysfunction.

Recent market analysis from Container xChange shows the average container price in August to be half of what it was in August 2021 and container leasing rates dropping by 17 per cent overall from June to July this year.

According to the logistics technology company, the one-way rate from China to Canada dropped 49 per cent during the same period. That is the biggest container lease rate reduction from China to any other country.

Overall, prior to June 2021, one-way lease rates for standard shipping containers ranged between US$100 and US$300, but with global supply chain congestion exacerbating widespread container shortages, that per-container rate had jumped to US$2,792 by September 2021.

According to Container xChange analysis, that rate has since dropped to US$906 in July of this year.

Rates for shipping containerized goods on the transpacific trade loop have also declined sharply this year.

The most recent spot freight index compiled by Shifl, a New York-based digital freight forwarding company, shows the rate to ship a 40-foot container from China to North America’s West Coast dropping below US$5,000 for the first time since the pandemic inflated that rate to US$17,500 in September 2021.

Lower lease and spot rates for containers point to lower demand; lower demand provides promise of reduced supply chain congestion.

Drewry noted in a recent report that port congestion in North America, which is the world’s most congested region for container cargo, has dropped from 20 times normal congestion to 10 times the norm. The U.K.-based global shipping consultancy added that the best-case transit time from the last port in China to the first port on North America’s West Coast has been shortened to 20 days from 34 in January.

Transit data measures the time it takes for a cargo container to leave its port of origin until it is unloaded at its destination terminal.

A.P. Moller-Maersk (CPH:-MAERSK-B), the world’s largest container shipping company, noted in its second-quarter 2022 financial report that global container volumes declined by 2.3 per cent compared with the same quarter in 2021, while throughput at major global container ports increased by 2.8 per cent. But it pointed out that landside supply chain congestion “continues to be an issue around the world.”

Shabsie Levy, Shifl’s CEO and founder, noted that while transpacific spot freight rates are decreasing, “they are still more than three times higher than they were prior to the pandemic.”

But he added that the rates “are at levels far lower than at the beginning of 2022, when consumer demand was extremely high. The pace of this continued decline points to the market returning to some semblance of the new normal.”

Shifl data shows transit times from ports in China to West Coast North American ports have dropped to 32 days compared with 54 days recorded for a China-to-Los Angeles-Long Beach trip at the tail-end of 2021. That was 238 per cent higher than the average pre-pandemic transit time of 16 days. In March, transit times to the ports of Vancouver and Prince Rupert reached 53 days to Vancouver and 45 days to Prince Rupert, but eased slightly to 44 and 31 days, respectively, in April.

Meanwhile, Port of Vancouver rail dwell times continue to be an issue. 

The measurement of how long a ship’s containers take to be offloaded at the dock and loaded onto rail cars spiked to around 8.1 days in December 2021 and had dropped to 4.5 days in June 2022, but was up again to 6.6 days in July.

According to Port of Vancouver data, its container ship congestion has eased since January and February when 54 per cent of container ships were forced to anchor while they waited for berthing space to load and unload at port terminals. That percentage had dropped to 27 as of July. The current average time for vessels to be at anchor in the port is 10.8 days.

As reported in an earlier BIV story [“Cargo Congestion Easing, But Peak Season Chaos Looms Large; issue 1699-70, May 23-June 5], container ships rarely had to wait at anchor in the Port of Vancouver pre-pandemic. 

“That was almost an unheard-of event,” Cliff Stewart, the Vancouver Fraser Port Authority’s (VFPA) vice-president of infrastructure, told a May 12 Journal of Commerce Canada Trade and Shipping Outlook panel.

Peter Xotta, the VFPA’s vice-president of operations and supply chain, conceded that June and July Port of Vancouver numbers “weren’t great from the perspective of just about all measures [including] vessels waiting, the amount of cargo waiting and the [rail] dwell on terminal, but it’s improved significantly; July to August, we’re seeing things stabilize.”

He noted, for example, that rail dwell time in the July-to-August period was trending in the direction of a 30 per cent reduction: down from 6.6 to 4.4 days.

He credited good rail supply and increased diligence from all links in the local supply chain for the improvement.

The 27 per cent of container ships forced to wait at anchor for terminal berth space, he said, “is not a condition we want to see over the medium term, but it’s an unfortunate reality for us.”

Xotta pointed out that the Port of Vancouver continues to dig itself out of the supply chain hole created in large part by last year’s floods and fires that knocked out critical pieces of the Asia-Pacific supply chain and created significant backlog bottlenecks that have been unique to B.C.

While transpacific cargo flow has slowed as major suppliers in North America scramble to adjust their inventory as consumer demand increasingly shifts away from goods to travel and other services, retail sales in Canada and the United States continue to be robust.

In Canada, Retail Council of Canada data shows retail sales in the country up 11 per cent in June to $67.5 billion compared with June 2021.

During a July 14 container shipping market update panel discussion presented by S&P Global, a financial analytics company, Jonathan Gold, vice-president of supply chain and customs policy for the National Retail Federation, pointed out that the retail sector in the United States has recorded year-on-year sales growth for 25 consecutive months. It was up seven per cent in 2020 compared with 2019, 14 per cent in 2021 compared with 2020 and is currently up 7.3 per cent this year compared with 2021, which Gold noted was “a record in sales for the retail industry.”

He added that 2022 retail sales in the United States are on track to grow between six and eight per cent despite high inflation numbers.

“Several years ago, you heard about the retail apocalypse and how all these retail stores were closing,” Gold said. “But you know, throughout the pandemic, we’ve actually seen the number of retail U.S. stores hit the highest level in over a decade, with over one million stores.”

But Gold added that retailers continue to face significant supply chain challenges that will persist into 2023.

David Bennett agreed.

The chief commercial officer for Farrow, North America’s largest customs brokerage, said intermodal supply chain dwell times are increasing in major transpacific cargo hubs like the Los Angeles-Long Beach port complex.

“Clearly, I think we still have a lot of headwinds facing us. We are looking at the simple fact that rate levels are still five times normal. Dwell times from the perspective of the berth side, port side and intermodal side remain challenging. And it’s pretty clear to me that we still have a lot of volatility in this market. And we need to be prepared for this volatility for the foreseeable future and, as Jonathan [Gold] said, probably well into 2023, based on the forecasts that we’re seeing.” •

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