The Global Shipping Crisis
Global Shipping Crisis: Record U.S. Container Import Volume Continues in June, but Signs of Increased Congestion and Delays
U.S. container import volumes in June 2022 set yet another record versus 2021. While lower than the all-time record of May 2022, volumes remain above the level that has caused port congestion and delays for the last 15 months. A number of factors, such as the economy, inflation, high fuel costs and an increase in the number of ships waiting off ports, continue to make navigating supply chain risk complicated.
The June update of the logistics metrics Descartes is tracking continues to point to congested and challenging global supply chain performance for the rest of 2022. For importers and their logistics providers still looking for the elusive turning point for the world’s supply chains, the light at the end of the tunnel appears to still be some way off.
In this Article...
June continued the record monthly trend for U.S. container import volume.
At the halfway mark of 2022, container imports into the U.S. set another monthly record (see Figure 1), as the TEU volume was up 3% from June 2021 to 2,480,946 and up 26% from pre-pandemic June 2019. Every month in 2022 has been a record month when compared to previous years. June container import volume was down 5% versus May 2022, but in a pattern consistent with previous years other than the start of the pandemic in 2020.
Figure 1: U.S. Container Import Volume Year-over-Year Comparison
Source: Descartes Datamyne™
In June, U.S. container import volumes from China were down 2.5% to 934,600 TEUs compared to May 2022; however, year-over-year imports from China are up 2.7% in June. On a relative basis, imports from China only declined by half as much as the decline in overall U.S container imports (2.5% versus 5%, respectively). China also fared much better in June than the next two largest import countries: Vietnam (-12.5%) and India (-14.9%). It will be interesting to track in the coming months how having Shanghai and other large Chinese manufacturing and port cities back online, holiday season demand and existing order backlog impact container import volume from China.
Top ports take back market share
The slight decline in container import volume in June 2022 versus May 2022 impacted smaller ports more, and the East and Gulf Coast ports continued to lead the West Coast ports in volume as importers continue to mitigate supply chain risk.
Comparing the top five West Coast ports to the top five East and Gulf Coast ports in June 2022 versus May 2022 shows that, of the total import container volume, the East dipped to 45.4% in June 2022 from 44.4% in May 2022, while the West edged slightly higher to 42.3% in June 2022 from 41.5% in May 2022. The top 10 ports reversed the trend of losing business to smaller ports. In June 2022, the top 10 represented 86.7% of all volume, compared with 85.1% in May 2022 and 86.1% year-on-year.
Looking at five-month periods (see Figure 2), top West Coast ports (orange), with the exception of Long Beach and (barely) Seattle, experienced container throughput shifts to other ports, including on the East and Gulf Coasts. The Port of New York/New Jersey retook the top spot at 460,414 TEUs in June up ~24,000 TEUs compared with May. The Port of Los Angeles came in second and Long Beach third, but dropped considerably in June by ~63,000 and ~21,000 TEUs respectively.
Figure 2: Container Import Volume Shifts at Top 10 Ports
Source: Descartes Datamyne
Port delays were mixed with other signs pointing to future congestion issues.
June 2022 was a mixed month versus May 2022 for port delay time. Delays reduced at four of the top five West Coast ports but increased at four of the top five East and Gulf Coast ports (see Figure 3). These numbers are quite consistent with the percentage of ships waiting off ports according to MarineTraffic/American Shipper with 64% of the ships off the East Coast and only 36% off the West Coast. East and Gulf Coast ports have benefitted during the pandemic by importers shifting because of the challenges faced by West Coast ports; however, they may now be falling to the same capacity challenges that West Coast ports originally faced with the increased demand. Equally concerning is that the number of ships waiting off all ports climbed 36% to 125 in June, which by itself is a warning sign of future port congestion and increased delays.
Figure 3: Monthly Average Delays (in days) at Top 10 Ports
|NEW YORK/NEW JERSEY||13.6||13.7|
Source: Descartes Datamyne
Note: Descartes’ definition of port delay is the difference as measured in days between the Estimated Arrival Date, which is initially declared on the bill of lading, and the date when Descartes receives the CBP-processed bill of lading.
Labor issues could put a halt to any gains top ports have been making. On the West Coast, the International Longshore and Warehouse Union (ILWU) contract expired the July 1; however, business has proceeded as usual with the union working with management. Hopefully, the two sides can keep the negotiation from impacting container processing as it had- in the past as they come to agreement. To add more woes to California ports, drayage owner-operators have called for a work stoppage to protest the refusal of the U.S. Supreme Court to hear the case challenging California law AB5, which would make them employees of carriers contracting the moves. This protest could also impact processing capacity and increase delays inland from ports. Lastly, Germany, the 8th largest country of origin for U.S. container imports, is facing work stoppages at its largest ports (Hamburg, Bremerhaven and Wilhelmshaven) because of stalled negotiations.
The economy, peak season, inflation and fuel costs are all clouding the import volume future. Despite many recession warnings and high inflation, the U.S. economy still remains strong. The July Jobs Report shows more jobs filled than anticipated and unemployment steady at 3.6%—only 0.1% off the all-time unemployment low. Durable goods purchases are also still high. The impact of peak season on container import volumes is uncertain. While some retailers say they have high inventory levels, it’ not necessarily the right inventory. For example, there are many popular items that still have extremely limited availability, such as gaming consoles that will be in demand for the holidays. Additionally, potentially dampening container import volumes are the 40+ year record inflation rates with June coming in at 9.1%—and high fuel costs one of its key contributors. Fuel costs appear to have leveled or even slightly declined in early July, but are still high and not likely to change for the foreseeable future given the disruption of global energy markets as a result of the Russian invasion of Ukraine and subsequent sanctions on Russia.
To access other articles that track port congestion monthly, visit the Global Shipping Crisis Resource Center
Executive Vice President of Industry and Services
Descartes Systems Group
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Managing supply chain risk: what to watch in the second half of 2022.
The big question on the minds of importers and LSPs is when, or if, a decline in US import volume will occur in the second half of 2022. In addition, several significant one-time events could exacerbate the ability to move goods globally. Here’s what Descartes will be watching:
- Monthly TEU volumes between 2.4M and 2.6M. This consistently high level will continue to stress ports and inland logistics until infrastructure can be enhanced. June U.S. container import volume was almost 2.5M TEU.
- Port wait times. If they decrease, it’s an indication of improved port processing capabilities or that the demand for goods and logistics services is declining. Port wait times were mixed with West Coast numbers declining and East Coast numbers climbing. Worrisome is the significant increase in ships waiting off ports.
- Continuing impact of the pandemic. The spread of COVID subvariants continues to add uncertainty to the trajectory of the pandemic and may continue to impact supply chains in unpredictable ways as different countries are affected at different times and for different durations. New variants of COVID are coming in waves and threaten to create more lockdowns or disrupt labor capacity this Fall.
- Key economic indicators such as the inflation rate, monthly BLS Jobs Report, FRED Inventory to Sales Ratio and FRED Personal Consumption Expenditure: Durable Goods. A fundamental change in consumer buying behavior from services to goods occurred early in the pandemic and was the force behind the dramatic increase in U.S. container import volumes over the last two years. The June numbers do not yet show the economic slowdown that has been forecasted.
- ILWU contract negotiations. The negotiations could be uneventful or they could turn port operations and supply chains upside down in the second half of 2022 and possibly beyond. Negotiations began as scheduled in May. The ILWU contract has expired, but to date there hasn’t been an impact on West Coast port operations. However, there are more workforce related issues in California and Germany that could slow down port operations.
- Inflation and the Russia/Ukraine conflict. Inflation may be the only way to slow down the strong U.S. economy and ultimately help to alleviate the global logistics capacity-related problems that exist. These are the factors that could slow down the economy; inflation was higher in June and the effect of the Russia/Ukraine conflict on fuel costs continues.
June was yet another record month.
June 2022 was not as strong as May 2022 for U.S. container import volumes, but it was yet another record versus 2021. The strength of the U.S. economy continues despite numerous pressures to slow it down. Ports have more ships waiting at sea, especially the major East and Gulf Coast ones, which could portend increased delays. Combined with labor-related issues, this could continue to make managing supply chain risk more complex. This data reaffirms that it will be some time before the pressure on supply chains and logistics operations begins to lift. Descartes will continue to highlight key Descartes Datamyne, U.S. government and industry data in the coming months to provide insight into the global shipping crisis. We are staying the course with our current perspectives and recommendations with a few exceptions highlighted in bold:
- Monitor ILWU contract negotiations, California labor actions and similar situations abroad that could disrupt your supply chain.
- Watch port delays on the East and Gulf Coasts.
- Evaluate the impact of inflation and the Russia/Ukraine conflict on logistics costs and capacity constraints. Ensure that key trading partners are not on sanctions lists.
- Shipping capacity constrained? Rationalize SKUs to ship higher velocity and margin goods to maximize profitability.
- Focus on keeping the supply chain resources you have, especially drivers. The old adage “a bird in the hand is worth more than two in the bush” definitely applies here. Building trips to reduce stress and improve quality of life to retain drivers is now as or more important than wage increases.
- Track the spread of COVID variants to determine when they will hit critical parts of the supply chain. As COVID variants come in waves, they travel across the globe unevenly and create disruptions. Use tracking sites such as The New York Times to better understand their path and impact on global supply chains.
- Shift the movement of goods to less congested transportation lanes including smaller ports to improve supply chain velocity and reliability. Total transit time is important, but so is supply chain predictability. Evaluate alternative transportation lanes into the U.S., including entry through northern and southern borders and inland ports.
- Evaluate supplier and factory location density to mitigate reliance on over-taxed trade lanes and regions of the globe that are potentials for conflict. Density creates economy of scale but also risk, and the pandemic and subsequent logistics capacity crisis highlight the downside. Conflicts do not happen “overnight” so now is the time to address this potentially business disrupting issue.
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