Maritime Shipping Update- Part 1

Maritime Shipping Update- Part 1 (5)

The lockdowns, pandemic, availability of export goods, container capacity, port congestions, and inflation are a few causes of maritime shipping delays and increased freight costs, which are forecasted to continue at least until early 2023.

The results of American consumers hoarding everything led to the shipping container shortage in the last quarter of 2020. To avoid products running out the following year, companies overordered goods, leading to a series of accidents like the blockage of the Suez Canal.

The first two quarters of 2022 had led to additional supply stress as Russia invaded Ukraine, as well as China’s continued strict lockdowns. While facing the second half of the year, reports forecast another ground for supply stress – labor unrest.

Global Maritime Shipping Delays

The pandemic brought several changes that significantly affected the supply chain, leading to delays in delivery and increased freight costs, including:

Port Congestions

According to reports, due to carriers not stopping at Oakland Port, it is challenging for California to find a container capacity for their tree nuts and dairy products. Vessel carriers alternatively send empty vessels directly to Los Angeles and Long Beach Ports, taking advantage of the higher freight rates from Asia to the US West Coast.

The port congestions in Shanghai had risen during the Q2, which later extended to other parts of the country. The total dry bulk congestion levels in mainland China were reported to have increased between 30-40% since March. Although some have been diverted to alternative ports in northern and southern China, the overall congestion levels are still high with longer vessel queues.

The congestion and container capacity from China to the US are taking a domino effect, causing container shortages to take European goods to the US East Coast. Chile, for example, typically takes an average of 20 days to transport and unload goods to Philadelphia. Still, due to the congestion and transport delays, it is now reported to take 45 days. Therefore, the Chilean government introduced an action plan to prioritize perishable goods, including fruits.

Labor Unrest

Importers reroute cargos from Asia, avoiding potential labor unrest in Los Angles; however, long vessel queues in Savannah, Georgia, as an alternative route, still lead to significant port strikes, adding to further congestion.

Earlier this month, 31 container ships docked in Savannah, waiting for another 8-10 days before offloading. In New York port, the waiting time stretches until 20 days.

On the other hand, the labor contract of nearly 22,000 American dockworkers at California to Washington ports, which accounts for 40% of the US imports, has expired. However, the shipping companies and workers are still in talks, avoiding strikes.

Russia-Ukraine Conflict

Since 2020, the global grain and shipping costs have accelerated, but the Russia-Ukraine conflict helped push the increase. According to the United Nations Conference on Trade and Development (UNCTAD), the transportation rates of dry bulk goods increased by around 60%.

Around 50% of wheat from Russia and Ukraine is imported to about 36 countries. But with the ongoing conflict, the percentage may decline by 3.8%. Additionally, the weekly port calls have dropped to almost zero, considering that the Black Sea ports account for over 90% of Ukraine’s export grain shipments.

The grain storage capacity of Ukraine currently relies on its 2021 harvests; if ports do not loosen, this will cause new yields not to be stored, leading to food damage and shortages. Presently, shipments for Ukraine and Russia are kept in nearby ports, including Constanta, Germany, Hamburg, Istanbul, Netherlands, Romania, Rotterdam, and Turkey.

Furthermore, the conflict between both countries led to increased diesel by sea and tightened energy markets globally. The shipping fuel from the US to Brazil, for example, on a TC-18 route, is approximately USD 37,000/day – an increase of USD 3,800/ day before the conflict.

Continue reading Part 2 on Thursday!

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