SW GLOBAL OCEAN FREIGHT MARKET UPDATE Q&A
At the end of Q4, SW® department heads provided a review of the past year and an outlook for the year to come. Last year had many challenges and we thought it would be beneficial to share some of the insights we have with our customers.
We asked SW U.S. Customer Care and Logistics Manager, Mindy Huang, to address the questions that she and her team have been recently receiving. Mindy and her team routinely monitor factors impacting major trade routes around the globe – from container availability and port traffic, to railway schedules and air traffic.
What is the current status of the global freight market today?
Great question. In July and August 2020, when COVID-19 lockdowns and restrictions were lifted, imports reached an all-time high. The rush to restock depleted inventory in the U.S. has created a spike in orders – especially from businesses and retailers in the e-commerce sector. This resulted in an incredible surge in shipping requests from Asia to North America.
How does this surge impact shipments?
The increase in imports has caused an unprecedented backup in all stages of the supply chain. Most significantly, this has caused a shortage in containers and delayed wait times at shipping ports. As a result, ports have become more congested as ships cannot unload their cargo. In turn, railways are delayed an estimated 7 to 14 days since trains are waiting longer to be loaded.
What caused these container shortages?
There were a number of factors that contributed to the shortage. First, the surge in U.S. imports overwhelmed the entire shipping infrastructure, especially port operations. As the volume of goods being unloaded increased, available warehouse space filled beyond capacity. The limited warehouse space caused back-ups with the unloading process and ships had to wait to enter ports. To add to this, shipping companies began to prioritize sending empty containers back to Asia as soon as possible to keep up with the high demand. This in turn delayed U.S. exports and left additional goods sitting in overcrowded warehouses at the ports.
How have the container shortages affected U.S. ports?
U.S. ports have become overwhelmed because of the spike in imports and resulting shortage in available containers. The Port of Los Angeles is the busiest port in the U.S. and the top destination for imports from China. Currently, the congestion has forced ships to anchor outside of the port for weeks waiting to unload.
The LA congestion has caused ripple effects at other ports across North America, including New York, Seattle/Tacoma, and Vancouver/Prince Rupert. At these locations, ships have to anchor outside the ports for 1 to 2 weeks to berth.
Has the backup only been at ports?
Unfortunately, no. This congestion has carried over to trucking, resulting in lengthy container drop-off and pickup processes, delayed status updates from ships, and a truck driver shortage. There has also been a shortage in chassis, the frame that attaches to the back of a truck to hold the shipping container.
When are things expected to improve?
Imports are not expected to slow down until manufacturing in Asia halts for the Lunar New Year, which begins February 12, 2021. Demand for imports is anticipated to remain high, and we are predicting the resulting port backup and container, space, and chassis shortage to continue into Q1 of next year.
What is the SW plan for handling shipping delays?
Our central warehouse is in Memphis, Tennessee. The transit time from port to warehouse has typically been around 35 days, but now it’s taking 55 days. However, we have been monitoring this situation daily and continue to make adjustments to keep supply moving and reduce as many delays as possible.
What else has SW been doing?
Our CEO, Belle Chou has consistently prioritized customers’ needs during this time and challenged us to take initiatives that meet these needs. She has been adamant about this since February, when she first briefed us about the issues that she thought would significantly impact our supply chain and customers.
To this end, we have focused on stabilizing prices and have updated our prices monthly to reflect current market conditions. Additionally, Belle is involved with other industry manufacturers and material suppliers, consistently working with them to find ways to maintain supply of essential PPE products as the pandemic continues to significantly impact this market.
What is going to happen next year?
So many of the challenges our industry has faced are a result of the global pandemic, but we are planning on a fresh start for Q1. Looking ahead, we expect these delays to continue for the next few months. However, with the upcoming closures due to Chinese New Year in February, there is a good possibility that shipping will better catch up with demand. This outcome will dictate how the rest of the year goes, and we are hoping for smooth sailing.
If you have any questions about this fourth quarter or any future topics, please contact the SW Customer Care team. We are happy to continue to update our community on these changes and will keep you in the know.
Mindy Huang is SW U.S. Customer Care and Logistics Manager and can be reached at mhuang@swssglobal.com.