Congestion problems are getting worse
As we enter a new year, and with the global supply chain chaos of 2021 in mind, you may have been hoping for light at the end of the tunnel. Unfortunately, hard facts show us that the situation will get even worse in 2022
New figures on worldwide vessel movements do not yet show an improvement compared to the previous months. Meaning that 11,5% of the fleet of large containerships is currently not in use, most of these ships are in long waiting queues in front of the ports. At anchor waiting to be unloaded. Until these bottlenecks are resolved, there will be no further improvement on the situation and there will be a significant shortage of ships.
There is market data up to the first days of January 2022, which indicates that it now takes containers an average of 110 days to arrive from Asia to North America. From the day the exporter has the cargo ready until the day that the importer picks up his cargo. By comparison, this took just 45 days before the pandemic. It is also a deterioration over the past month, where in early December it “only” took 105 days.
Most well know example of this problem is the congestion for the American west-coast, with numerous ships anchored for the ports of Los Angeles and Long Beach.
On January 4, there were 102 ships waiting to be unloaded, compared to 89 ships in November. In the second half of December, these numbers were mainly between 95 and 100 ships. The only difference now is that the ships are further away from the coastline, in order to avoid air pollution close to the coast as much as possible. Another ongoing problem in these ports is that they are flooded with containers that are no longer collected. This is due to various factors such a shortage of trucks, trailers and rail capacity. At the end of October, more than 405 of the import containers stayed at the terminals for at least more than nine days.
To solve this problem, the authorities of both ports are going to fine on containers that have been in port for at least nine days. But further implementation of this rule has already been postponed eight times. In the beginning, the threat of a fine alone had a positive effect. At the end of November, the number of ‘stranded’ containers had decreased by 37% compared to the figures at the end of October. This trend continued in the first weeks of December with a further fall of 47%. But not long after that the containers were literally piling up at the terminals again. On January 3, the difference with the end October was only 35%, and this will further develop to the level we see at the end of November.
Bottlenecks in Europe were at a high level but stable from late August until November. Since then, the problems have gotten worse. The index for bottleneck problems in Europe has now reached a record high and is significantly worse than what we saw in the wake of the closure of the Suez Canal in the spring of 2021.
Asia appears to be the only region that has not seen any deterioration in recent months.
All in all, the data is quite clear: the bottlenecks have already clearly worsened in recent weeks. Looking ahead it is very likely that the situation will deteriorate even further. The Chinese New Year festivities will start on February 1 this year and is, like every year, putting extra pressure on global supply chains. Extra pressure on top of the already existing congestion problems.
A much bigger concern in relation to China is the way the Chinese government is handling COVID-19. The Chinese Government has a zero-tolerance policy towards the virus, and therefor will completely shut down areas, cities and towns after a minimum of infections. At the time of writing, three major lockdown situations that affect container logistics are already occurring. The first is a closed boardercross between Vietnam and China due to a small virus outbreak in a small Chinese border town. Thousands of trucks are already stranded at the border. The second lockdown situation takes place at a small part of Ningbo. The port itself is not directly affected but the restrictions have led to the closure of several container deports and storage facilities. Trucks can enter and leave the area, with correct paperwork. However, many truckers do not yet have these papers. In the third situation, more than 200 crew members working on the Yangtze river have been quarantined. This has significantly reduced the number of ship available on the river, which connects the port of Shanghai with major cities and production centres further inland. Not only does this make it more difficult to export products from central China, but it also means that is much more difficult to return empty containers to central China. This will cause problems in the long run.
It is a fact that the new omicron variant of the COVID-19 virus is more contagious than previous variants. This means that the risk of an outbreak in China is many times more than in 2021. This also means that the risk of outbreaks will create further problems for supply chains to and from China and should be considered highly likely in the coming week and months.
Unfortunately, 2022 turns out to be an even more challenging year than 2021.
