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AFP Contributor | AFP | Getty ImagesA perfect storm in global trade is creating a shipping container capacity crunch, fueling a sudden and surprise spike in ocean freight rates. Xeneta ocean freight rates show the rallying spot market and the widening spread between spot and long-term rates. An increase in ocean freight rejections shows the imbalance. Logistics price increases are ultimately passed onto the consumer and the dizzying freight rates during the pandemic were among factors cited by the Federal Reserve as a cause of inflation. The International Chamber of Shipping, which represents major ocean carriers, did not immediately respond to a request for comment.
Persons: Emily Stausbøll, Stausbøll, Goetz Alebrand, Alebrand, Judah Levine, Freightos, Levine, Wan Hai, HLS, Drewry, Jonathan Gold Organizations: AFP, Getty, U.S ., Xeneta, DHL, Shipping, Americas, DHL Global, CNBC, Federal Reserve, Orient Star Group, MSC, Chamber of Shipping, Honour, Carriers, Maritime Locations: Qingdao, Shandong province, AFP, Asia, U.S . West Coast, U.S, China, Malaysia, Singapore, Panama, Latin America, Europe, Chongqing, East Asia, South America, Africa, U.S . East Coast
The decrease negatively impacts earnings for both trucking and rail where revenue is generated by moving freight. Ocean freight orders are a leading indicator of train and trucking earnings since 90% of the world's trade moves by water. This is one of three key supply chain charts that are signaling more financial potholes for trucking and rail companies. West Coast ports have been losing trade to both the East Coast ports and Gulf ports as a result of prolonged labor negotiations, though union representatives indicated last week a "tentative agreement" had been reached, but no details were provided. Trucking is needed for both container pick up at the ocean terminals and rail ramps.
Earlier this week, the Port of Los Angeles posted its lowest level of October since 2009. "Firstly, shippers are still avoiding the West Coast to mitigate the risk of labor strikes at LA and Long Beach. According to Project44 data, total vessel TEU capacity deployed from Europe to the East Coast is up 15.5% compared to Oct 2021. CNBC Supply Chain Heat Map providers warned in the summer and fall of a decrease in manufacturing orders which has impacted the volume of shipping. The lesser container volumes are now being seen off the ports across the East Coast, including New York and New Jersey.
"As shipping lines reduce their vessel calls in the form of blank sailings, this reduces the capacity for outbound volumes. Sea-Intelligence wrote in its recent blank sailings report that it has detected some unannounced cancellations for the calendar-year period of weeks 42-52 in the past two weeks. "Blank sailings have been ramped up drastically on the Transpacific, but not so much on Asia-Europe," said Alan Murphy, CEO at Sea-Intelligence. On Asia-North Europe routes, Sea-Intelligence is only seeing an additional six blank sailings, and on Asia-Mediterranean routes an increase of four blank sailings. The weekly average of vessels waiting this week is 14, waiting for an average of 6.3 days.
A striking dockworker on a picket line outside the Port of Liverpool during a strike in Liverpool, UK, on Tuesday, Sept. 20, 2022. The shop stewards who represent union workers accepted Peel Ports request for a meeting at the union office on Tuesday. Supply chain impact from second round of U.K. strikesThe latest development comes amid mounting labor issues linked to inflation at U.K. ports, with workers at the nation's largest port, Felixstowe, beginning another strike this week after one in August. "Unite made it clear that until they have reached their goals these waves of strikes will continue which will have a massive impact on the Christmas business and supply." The CNBC Supply Chain Heat Map shows the present situation at the ports.
Tensions are rising in West Coast port labor battles as unions and port management trade accusations about worker productivity and the awarding of job assignments. Jerome Roberts, GVP of marketing at supply chain consulting company Blume Global, told CNBC the one shift protest had no lasting productivity impact. Logistics companies fear the latest round of accusations will only increase tensions for a supply chain and national port infrastructure already dealing with multiple labor concerns. Project44, which also collects and analyzes port productivity for the CNBC Supply Chain Heat Map, has tracked some recent issues at Seattle operations. Container dwell times at the Port of Oakland have been improving over the month of September, according to Josh Brazil, vice president of supply chain insights at Project44.
This comes as the flow of trade continues to move away from the West Coast with logistics managers worried about a labor strike or lockout. More East Coast trade, and more port congestionThe CNBC Supply Chain Heat Map for the U.S. shows how the continued increase in trade has East Coast ports and Gulf port as the winners in this movement of freight. Maritime prices fallingThe flow of trade away from the West Coast has decreased the demand for vessel space, leading Far East to West Coast maritime freight prices to fall. "Shippers are still bringing in a lot of containers, on the East Coast and West Coast and Gulf Coast as well." Shippers are still hesitant to return re-routed cargo to the U.S. West coast, Sand said.
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