As we have discussed in our June Port Report, there have been some changes to the international ocean logistics trends we have been tracking this year. As we look ahead to peak shipping season, here are a few notes to keep in mind.
Ocean Transit Reliability
Globally, while still better than the record-lows of 2021 and 2022, we are seeing a decrease in ocean schedule reliability, and an overall increase in delays for product departing from Asian manufacturers. This is influenced by a number of factors, including but not limited to:
Port congestion resulting in decreased availability of vessels and containers, especially in Singapore & Dubai/UAE ports which are seeing congestion worse than levels seen during the COVID-19 pandemic.
Worldwide container shortages due to vessels being on the water longer, out of their usual lane, skipping ports entirely, blanking departures, or otherwise delaying departure until they are completely full.
Empty containers are now “stranded” at atypical ports, far from where they are needed most.
Increased demand prior to the typical “peak” season --- a surprise to many carriers who are already balancing the above factors and more.
Per a report released by DHL – many new containers are fully booked until August
Un-anticipated delays due to the Panama Canal, or avoidance of the Suez Canal.
Ocean Container Costs on the Rise
According to data provided by Freight OS, global container costs are now at a yearly high, a stark contrast to the reduced rates we had seen in late March and early April.
The average container price from Asia to the US East Coast is now around $7,500, while rates from Asia to the US West Coast are now around $6,000.
Comparatively, the spike in average container prices from Asia to Europe is even more dramatic, as current rates of around $6,500 has more than doubled the global low rates we saw in the spring, with many experts expecting continued increases.
A few of the factors influencing the global ocean rate increase:
Avoidance of the Suez Canal via the Cape of Good Hope
The route through the Cape of Good Hope not only adds transit time, but also is more likely to encounter rougher waters & bad weather leading to further increased lead time.
Delays at the Panama Canal due to the drought and reduced traffic allowance
Imports are increasing year over year even outside of the typical “peak” season which leads to more vessel traffic globally.
As discussed above, global schedule reliability is decreasing, resulting in cascading delays.
Increased demand, decreased container and vessel supply, and unreliable vessel schedules, combined with container traffic disruptions stemming from the critical Panama and Suez Canal lanes, have led to global elevated container rates regardless of destination port. However, it’s important to note that this yearly high is still lower than the sky-high rates that we saw during the COVID-19 pandemic.
Rain in the Panama Canal
Speaking of the Panama Canal, there has recently been reports of some optimistic news. The dry season ended in April, and Panama has been seeing an increase in rainfall resulting in water levels rising. This has allowed the number of vessels allowed to go through the canal to increase from 24 vessels to 31 vessels at the beginning of June, and expected to go up to 34 vessels in late July.
This is still lower than the typical average of 38-42 vessels per day, but this news could help provide some relief to shippers who are already experiencing delays. We are cautiously optimistic that the canal may be able to return to full capacity by the end of the year.
East Coast and Gulf Ports Wary of a Potential Strike
Another factor to keep in mind as the peak season approaches is a potential strike of dock workers on the East and Gulf Coast Ports, which includes key ports of New York/New Jersey, Savannah, and Houston. The International Longshoremen Association (ILA) represents workers along the eastern seaboard and Gulf coast ports, and their contract with the United States Maritime Alliance (USMX) expires September 30, 2024.
Negotiations have been in progress since May, however there has been a snag in the schedule as talks have stalled as of June 14th following the discovery of an auto-gate system in Mobile, Alabama. Per ILA representatives, the use of these automated gates “…is a clear violation of our agreement…” with USMX.
At the time of this report, there have been no calls for strikes or work stoppages. Union representatives have recently released statements alluding to potential stoppages at the expiration of the contract, however it is unlikely that there will be any action until the end of September.
Obviously, any disruption to labor availability will have a significant impact on container traffic through the affected ports and will likely exacerbate the impacts of rising container rates and decreasing lane reliability. As we saw last year with the labor negotiations on the West Coast Ports in the US and Canada, there is likely to be escalation tactics from both sides as we approach the end of September. As we continue to monitor the negotiation process, we at Audit Logistics remain optimistic that both parties can reach an agreement before the expiration of their current contract.
Conclusion
While this update is quite a grab-bag of news, there is one course of action that all of these stories support: the fastest and most reliable way to get product to the US from Asia is to ship to a West Coast port.
Container prices are rising, but are still cheaper than the East Coast and historically, are likely to remain that way.
Since the ratification of the new contract in Sept. 2023, the West Coast ports have not seen strikes or work stoppages due to union disputes.
Ships only need to sail the Pacific Ocean to reach the US. No need to utilize the Panama Canal, or skirt around the Suez Canal.
Project teams will need to weigh the benefits of getting relatively reliable containers at a lower price against also needing to pay for additional overland transport.
We will continue to keep an eye on these stories as they continue to develop. Please do not hesitate to reach out to your freight manager should you have any questions about how these factors may impact your project.