“Perfect Storm” Impacts US Imports

February 16, 2021

US importers are seeing record-high ocean import rates along with long delays in transit times for ocean containers imported into the US. Ocean carriers have removed ships from service and US import volumes are extremely high and the rates are being driven up due to these factors. In many cases rates are more than double what they were earlier in 2020 and these high rates can be expected to continue into the foreseeable future. Below is the latest information we have at this time:

• Ocean Container Supply Low and Cargo Space Tight at Many Points of Origin. Suppliers in most of Asia are struggling to get empty containers from the carriers to load as carriers are reporting container shortages at many larger ports of export. In some cases it is taking a week or longer just to get an empty container for loading. While carriers are attempting to reposition empty containers to address this issue the increased volume of exports will mean that it is likely to remain problematic through the summer and possibly into the peak season of mid-late 2021. With cargo space in high demand many suppliers are seeing a week or more delays to get their containers on vessels bound for the US adding to the transit delays.

• Congestion at US Ports Continues. As of Friday, Feb. 12th over 60 container ships were either awaiting unloading at the terminals or are anchored awaiting terminal berths in the busiest US port of import in Los Angeles / Long Beach. This problem has already persisted for several months and is likely to continue. The reasons for the congestion are many, including high import volumes, lack of terminal berths to handle the high volume, container chassis shortages, trucker shortages, and backlogs with the inland-bound railroads. Impacts from the congestion are causing delays of 7-14 days in the port, another several days for trucks and an additional 4-7 days of rail transit time to inland ports. It is not uncommon to see overall transit times running 15-20 days or more longer than normal. Congestion and delays reported in many other US ports as well. These problems are likely to continue through much of 2021.

• US Consumer Purchasing is High, Could Increase With Further Government Stimulus. While many Americans have seen vacation travel restricted they are spending their money on home improvement and other purchases. As consumer demand increases so will the demand for more imports making the pressure on an already over-loaded international supply chain. While consumer purchases can help the US recover from COVID-related economic downturn the supply chain bottlenecks could lead to increased frustration for all parties involved. Patience will be needed to navigate the months ahead.

• Importing Costs are High and Likely to Get Higher. Ocean carriers are doing all they can to keep rates high and with the “supply and demand” principle at work to help them do just that. While most new contracts will be signed around May 1st importers will likely find that the low rates of the past are gone. Carriers will stand their ground and likely not give large discounts even to companies looking to sign large volume contracts. With all the challenges at the origin and US ports costs in those ports are likely to increase as well. Trucking costs are very high now as well and likely to go higher as companies are reporting a shortage of drivers in many markets.

Lots of news, mostly bad, but the question for importers is “what can we do?” Here are some suggestions:

• Understand the longer transit times and order early. Press suppliers to have orders ready well in advance of target arrival dates and have the suppliers make their ocean container bookings as early as possible.

• Work closely with your freight forwarder to help alleviate issues – your forwarder should have the latest updates and can help you navigate around some issues.

• Make sure your customers are aware of the problems being faced so their expectations can be adjusted accordingly.

• Be ready to exercise patience.

If you have any questions please contact us – info@tradelogicintl.com.