Port congestion issues likely to persist in 2022

Home Featured Post Port congestion issues likely to persist in 2022

port congestionBy Ken Ryan—In recent weeks, the port congestion in the West Coast has become national news as the holiday season approaches. Major retailers worry they won’t have products on their shelves during the all-important fourth quarter.

But this bottleneck is old news for the flooring industry, which has been dealing with it in earnest since the outset of the COVID-19 pandemic. And it has only gotten worse. In fact, the major backlog of container ships at the ports of Los Angeles and Long Beach is the worst it has ever been, according to Marine Exchange of Southern California, which estimates 100 ships are waiting to dock and unload. To put that into context, there would typically be less than 20 ships at anchor in pre-pandemic times.

According to Marine Exchange of Southern California, the higher the number of ships waiting offshore, the bigger the queue and the longer it takes for a vessel to get a berth. In September, the average wait time to reach a berth in Los Angeles (30-day rolling average) rose to an all-time high of nine days. That, in turn, delays imports. Back in August 2020, when import demand surged post-lockdowns, there were almost no ships at anchor off Southern California. This past August, there was an average of 36 ships at anchor per day, according to Marine Exchange data.

Flooring distributors say they already expect the backlog to last well into 2022 and beyond. “Back up is so large and so staggering that I would normally say in three to six months things will be caught up,” said Jeff Striegel, president of Elias-Wilf, Owings Mills, Md. “The problem is, just as they are starting to catch up, Chinese New Year hits (Feb. 1) and the plants in China close down.”

Striegel said he is ordering product in November in hopes of receiving product by June—seven months later.

The problem isn’t just at the ports, of course. Once the container ships are offloaded, the issue becomes one of logistics, as there is a shortage of both trucks and drivers. Given this scenario, distributors readily acknowledge the supply chain issues (extended ocean travel times, freight costs and congestion at the ports) will likely continue until the second half of 2022, possibly into 2023.

The only solution, they say, is to rely on your supply partners and have as much inventory on hand as possible.

Shipping rates rise ever higher

As flooring executives know all too well, container shipping rates from China to the U.S. continue to soar, climbing above $20,000 per container, compared with just $4,000 a year ago. The rising prices are posing a threat to a global economy already struggling with the effects of the COVID-19 pandemic.

The soaring costs, as documented by freight-tracking firm Freightos, along with chronic delays, may lead to an increase in consumer prices.

The Delta variant slowed global container turnaround rates in several countries while the semiconductor crunch, rising prices of raw materials and typhoons off China’s busy southern coast have also contributed to the crisis, observers say.

China’s shipping capacity was also disrupted after the Meishan terminal at the world’s third biggest port, Ningbo-Zhoushan, was closed for two weeks following a COVID-19 outbreak. The world’s ports and shipping lanes have also been beset by bottlenecks, with hundreds of container ships waiting off ports globally, not just on the West Coast.

“These factors have turned global container shipping into a highly disrupted, undersupplied seller’s market, in which shipping companies can charge four to 10 times the normal price,” said Philip Damas, managing director at Drewry, a maritime consultancy. “We have not seen this in shipping for more than 30 years.”

Damas added that he expects the “extreme rates” to last until Chinese New Year in 2022.

The rate surge is the latest reflection of disruptions since COVID-19 hamstrung the global economy in 2020 and triggered huge changes to the flow of goods and healthcare equipment around the world.

“Every time you think you’ve come to an equilibrium, something happens that allows shipping lines to increase the price,” said Jason Chiang, director at Ocean Shipping Consultants. “There are new orders for shipping capacity but they will only come online in 2023, so we will not see any serious increase in supply for two years.”

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Oct. 25/Nov. 1, 2021

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