LA an d Long Beach

USA west coast ports fear chaos as labour negotiations loom

Apr 7, 2022 | , ,

Negotiations for a new labour contract with the International Longshore and Warehouse Union (ILWU), are due to start on the 12th of May and shippers are already sourcing products from Asia earlier than normal and directing more cargo to US East Coast and Gulf terminals, to avoid potential port chaos on the US West Coast.

Contract negotiations between the ILWU (which represents nearly 14,000 port workers in California, Oregon and Washington State) and Pacific Maritime Association (PMA), on behalf of shipping lines and terminal operators at 29 west coast ports, will begin on the 12th of May, against a backdrop of vessel backlogs, congested marine terminals, and inland supply chains struggling to handle near-record cargo volumes.

The pending negotiations come amid fears from shippers that an impasse could result in further disruption, leading some importers to shift traffic to the East and Gulf coasts, in an attempt to avoid any potential problems.

There is some cautious optimism for the negotiations, based on the cooperation that was demonstrated by longshore workers and employers, in handling the import surge that is now in its 20th month amid the COVID-19 pandemic.

US Secretary of Labor Marty Walsh cautioned not to judge this year’s talks on how prior negotiations played out. “You can’t look at history of past practices to say, ‘Well, in 2014 it was pretty bad, so that means in 2022 it will be pretty bad. ’That’s not how negotiations work.”

Neither the ILWU nor the PMA has spoken publicly as to what issues they view as crucial in this year’s negotiations. However, the union in recent years has publicly opposed the spread of automation on the West Coast.

Employers, on the other hand, have noted that in order to continue handling record cargo volumes each year on waterfront property that cannot be expanded, some West Coast terminals will have no choice but to automate, as automation allows terminals to almost double the cargo volumes they can handle on the same footprint compared with operating manually.

In past negotiations, discussions involving wages normally were not a major sticking point. According to the PMA’s 2021 annual report, the average salary for full-time general longshore workers was $182,789. Marine clerks’ average salary was $203,533, while the average for foremen was $280,352. Quite incredible by anyone’s imagination.

The perceived risk of disruption has led many importers to re-evaluate their use of West Coast ports and many of those, that have not ordered early, to land goods ahead of June, are diverting cargo to East Coast ports.

The ports of New York and New Jersey, Virginia, Charleston, and Savannah have been experiencing congestion for the past year and the diversion of West Coast cargo is escalating vessel backlogs along the East Coast and deteriorating service for importers, with Charleston experiencing the worst of it. Currently, there are 27 vessels awaiting berth. Typically, berthing takes approximately 1 day. At this time, the average is 10 days.

There are alternative access ports you can consider diverting to, in Canada, the Gulf and the East coasts, but, with so much cargo already diverted from Los Angeles and Long Beach, there are questions about how much additional capacity the most popular ports actually have.

We would ask that customers shipping to, or importing through, the West Coast speak to us at the earliest opportunity so that we can review their situation and prepare contingency plans to protect them.

Kevin Lake and Andy Smith, who has spent the last week in The USA, are available to discuss the latest solutions both in shipping port to port and the inland first/final movement of containers. They have this week set up emergency platforms for customers to ensure that product is delivered to market in The USA, without the delays experienced through alternative providers.

With planning, visibility and a collaborative approach, we will continue to provide the best option available to ensure that your products are moved and expectations are met, or adjusted accordingly in line with the real market situation.

Shanghai

Shanghai supply chain update– Lockdown extended indefinitely

Apr 7, 2022 | , , , ,

The lifting of COVID restrictions in parts of Shanghai this week has been postponed after nearly 20,000 new cases were reported on Monday.

While the primary port terminals and airport remain open, most workers are in locked-down neighbourhoods and the impact on production and inland logistics is severely limiting supply chain operations.

With limited goods available to despatch, demand for air cargo capacity out of Shanghai is decreasing quickly, with carriers cancelling flights. Despite the drop in demand, reduction in ground handling capability and capacity has seen air freight rate indexes to North Europe increase by 43% since the start of the recent outbreaks. Shanghai Airport is effectively closed for cargo receipt and despatch and is being redirected to Zhengzhou Xinzheng International airport nearly 1000 kilometres away.

The world’s largest sea container port remains open 24 hours a day and even though it is operating within a “closed-loop” bubble, which requires workers to stay on-site, increasing numbers are quarantined. While the closure of many warehouses, the drop in manufacturing and serious disruptions to trucking have significantly reduced the availability of goods and the port’s throughput, which reportedly has resulted in queues of in excess of 300 vessels, as of today, awaiting berth outside the port.

A flash survey on the impact of COVID on business in Shanghai found:

99% of respondents had been impacted by the recent outbreak

86% of manufacturers reported that their supply chains had been disrupted

82% of manufacturers reported slowed or reduced production

54% of respondents have decreased 2022 revenue projections 

The soaring number of cases in Shanghai has restricted driver testing capacity and with many drivers from neighbouring provinces reluctant to enter Shanghai, because of the risk of having to quarantine on their return, haulage capacity has been slashed.

The deteriorating COVID situation has raised concerns over worsening port congestion elsewhere in China, with Yantian and Shekou experiencing longer waiting times.

According to Bloomberg, there are 174 vessels anchored or loading across South China – the most since the region was affected by typhoons in October - representing 14% of the total fleet.

What was expected to be a relatively short situation is now becoming a much bigger concern to production by manufacturers, logistics infrastructure and ultimately the global economy with even greater challenges in what was an already challenging environment. This is creating issues both at a local level and on a much wider scale as detailed in this recent news article published by the BBC which is worth reading - China lockdowns 

With over 80% of manufacturers reporting disrupted supply chains and reduced production, factories may not meet planned delivery schedules. This is why we recommend checking with your vendors, to clarify the status of your orders.

Metro’s cloud-based supply chain management platform, MVT, simplifies the most demanding global trading regimes, by making every milestone and participant in the supply chain transparent and controllable.

With end-to-end visibility across the extended supply network and global control down to individual SKU level, it is simple to adapt to external developments. Changing supply lines, managing existing or adding new vendors, monitoring product flows and outbound order data, from any location.

To discuss how our technology could support your supply chain, please contact Simon George our Technical Solutions Director or Elliot Carlile.

Coronavirus impacts air and sea freight

The sea and air alternative from China

Mar 24, 2022 | , , , ,

China to Europe rail freight services have grown massively since the advent of the COVID pandemic, with volumes surging 29% last year. But with services transiting Russia and Belarus sanctioned and the Ukraine route halted, the equivalent of 1.46 million TEU needs alternative solutions.

Trains are still running along the Trans-Siberian route, but Russian Railways has been sanctioned so bookings have been suspended, with much cargo diverting to slower ocean services.

While cargo is not directly targeted, the uncertainty surrounding sanctions against Russia and Belarus means there is a very real risk of shipments getting stuck in either country during transit and there is no evidence yet of the impact of sanctions on insurance and settlements.

The China-Europe rail freight service from Shanghai has reportedly seen a 40% drop in bookings and its frequency has been reduced, while the Silk Road freight train from Vietnam, which operates via Zhengzhou, has been suspended. 

Alternative rail routes operate below the Trans-Siberian, through Kazakhstan, Azerbaijan, Georgia and Turkey via the Caspian Sea, or Romania via the Black Sea.

These routes mean longer transit times however, and could potentially face increased congestion, with seven or eight reloading processes before arrival in Europe.

The southern lane via Baku and Istanbul is likely to be a popular choice for rail enthusiasts, departing from Xian, with a mooted transit of 35 days to Germany, although this is likely to be longer and another 5+ days need to be added up to arrival terminal.

In practice sea freight rates are less and the transit time to main European ports faster and arguably safer than rail. Any substantial volume shift from rail to sea is likely to increase congestion, with demand increasing over 5% on an already over-subscribed trade route.

The effective alternative

Avoid the uncertainties and inefficiencies of sea and rail, by combining effective and reliable sea services, with dependable and rapid air cargo services, for reliable time-sensitive freight solutions from Asia.

Metro sea/air services operate via established and proven hubs in Singapore and Dubai, together with a selection of secondary transhipment hubs, to provide greater resilience against disruption and additional routing options for speed and cost options.

The most effective sea/air solutions use feeder vessels to move the freight to where the most appropriate air freight capacity and routing is available, at the most attractive cost. 

The first leg of transit is undertaken in a conventional ocean freight container, often on low-cost feeder vessels, but always on a direct and much shorter transit than would be the case on an all-ocean service.

This reduces the impact of incidents at ports and avoids delays, because short-sea transits have not been impacted by the service disruption and cost increases seen on deep-sea services.

Singapore and Dubai are two of the biggest pure freighter and passenger freighter airports globally, which means they retain a relatively high number of passenger flights, and consequently critical belly-hold capacity.

We continue to receive daily booking and departure requests and have the capacity, ability and reliability needed to deliver within timelines and to your deadlines.

We operate regular services from all major areas of manufacture; with Singapore servicing the Far East and South East Asia trades and Dubai geographically well located to serve suppliers in the Indian Sub-continent and further afield. Expert solutions that work, and have done for decades, when the market needs them – as they do now.

We recommend sea/air as a standard component in your supply chain toolkit, to plug gaps and fix delays. Elliot Carlie and Andy Brooks head the sea/air team and are available to discuss your situation and requirements.

Blanking is biting

Lines grow capacity and now cancel sailings

Mar 24, 2022 | ,

The container shipping lines have been increasing their capacity out of Asia, based on strong demand expectations through 2021 and while the increase of deployed capacity has extended, at least through the first few months of 2022, lines are now reacting to short-term demand fluctuation with cancelled sailings and surcharges.

Shipping lines expanded their capacity through 2021 with the deployment of new vessels, the chartering of additional capacity and the addition of hundreds of thousands of new containers to the global fleet.

In the 12 weeks following Chinese New Year, capacity will have grown 20% year-over-year on the Asia to US West Coast trade lane (40% on the East Coast!) and 19.3% on Asia-North Europe, which pundits insist is a firm indication that carriers are expecting no slowdown in demand.

Continuing congestion across ports in Asia, North America, and North Europe, in fact globally on most global trade lanes - and their inland distribution networks - has slowed the working time of vessels and the turnaround of containers, which has had the same impact as effectively removing 10% of global capacity. A conundrum currently that is highlighted with the market impact – which in theory should not be happening. But it is.

It was in an attempt to ease the space and equipment shortage, that carriers ordered hundreds of thousands of new containers and hoovered up every piece of spare shipping capacity they could find last year.

CMA CGM increased its total shipping capacity by 5.8%, Maersk 6.4% and Hapag-Lloyd 4.1%, to a total of more than 10 million TEU, while together, the major carriers acquired a total of 266 second-hand ships.

The carriers expected demand from Asia to Europe to remain strong in the first half, followed by a gradual easing through the rest of the year and not much change in demand to congested US ports and inland logistics before next year. That was of course before Russia invaded Ukraine.

And yet the barest hint of demand softening, as China’s latest lockdowns delay production and cargo availability, has carriers preparing to blank sailings in anticipation of low demand. A useful tool to have in your box.

2M carriers Maersk and MSC have announced three further void sailings for April, attributed to the “ongoing challenging market situation”.

In addition to more cancelled sailings, significant bunker surcharge increases should be expected from the shipping lines, together with rising haulage costs. Reports in the press suggest that ocean carriers in North Europe will add a 25% fuel surcharge to their line hauls from the 1st April.

Global freight operations are transforming, as the intense and sustained pressure that supply chains have been subjected to, expose weaknesses and inefficiencies.

Metro negotiate rate and volume agreements with a wide range of carriers across all three alliances, which means we can access the widest pool of equipment and offer shippers the biggest range of service offerings, port-pairings and rates.

Please contact Elliot Carlile to learn how we can support your supply chains, even in the most challenging market conditions.

Category: Sea

Coronavirus | Sea | Supply Chain

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