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Rachel Shames’ Market Update: Week #7

Transpacific Eastbound volumes have been down this month as a result of closures in Asia surrounding the Lunar New Year holidays, but vessels remain full due to blank sailings and continuing port congestion. Transatlantic Westbound trades are dealing with similar issues, with vessels out of Europe booked up 6-8 weeks in advance. All US inbound volumes continue to be plagued by full vessels, port congestion, and a shortage of truckers and warehouse space, keeping the fight for capacity intense and rates high.

US exports are faring better overall, though vessel space is tight and equipment availability can be very difficult, especially at inland container yards. The chassis and trucker shortages are impacting exports as well, as are the challenges with port congestion. Unreliable vessel schedules are a major issue for exporters across the country. Efficient scheduling of loading is nearly impossible when vessel arrival dates slip and CY cut-offs shift.

Air freight services inbound and outbound are stable but remain limited due to low rates of international passenger travel. Freight rates are still very high as a result of limited capacity on aircraft and on the ground; airline warehouses in the US are extremely congested, much like the ocean terminals.

The port of LAX/LGB is reporting the number of vessels waiting to berth around 70, a decent reduction from the recent high of 100+ over the holidays. Still, it remains at an elevated level not seen pre-pandemic, and there is a long way to go to clear the backlog. On the east coast, the ports of Charleston and Norfolk are severely congested; chassis shortages are a major issue, and it could take months to see improvement. Importers are holding equipment longer, both the containers themselves and the chassis, due to a lack of labor and warehouse space, creating more pressure throughout the supply chain. For southeast origins and destination, the ports of Wilmington and Savannah are better options for cargo that can be more easily re-routed.

Ocean carriers are negotiating with beneficial cargo owners (BCOs) on new contracts, which traditionally wrap up before moving to negotiations with non-vessel operating common carriers (NVOCCs or NVOs). With the exception of the top volume US importers, fixed allocation on import lanes is being reduced dramatically this year – as much as 40-70% with most carriers. This is a continuation of the trend with 2021-2022 contracts, which also brought allocation reductions to BCOs and NVOs alike. Carriers are trying to avoid over-committing on space this year. In addition to the goal of maximizing revenue with higher floating/spot rates, carriers are constrained by capacity and landside challenges. The issues with port congestion, chassis/trucker shortages, and lack of warehouse space mean high pressure throughout the supply chain, and carriers expect a continuation of necessary blank sailings and port omissions. Without sufficient ocean capacity sailing and discharging at regular intervals, there is much less reliable fixed allocation to go around.

There is optimism among industry leaders that an easing of landside challenges will occur in the second half of 2022. If inflation brings a reduction in consumption, for example, we’ll see import volumes and supply chain pressure decrease. However, the current challenges are so severe that it will take months, possibly years, to see improvement whenever volumes dip. There is also speculation that these newer, pandemic-era high volumes are here to stay for the long-term. Either way, landside infrastructure will need to be improved and expanded to keep pace, from terminal capacity to chassis pools to private sector warehouse space, along with the labor required to service all links in the supply chain. Ocean lines have new vessel deliveries planned for 2023-2024, and additional ocean capacity must be accompanied by landside capacity improvements to be effective.

Early booking is still critical for all modes and trade lanes; 30 days is the recommended minimum booking window for shipments, including trucking.

 

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Rachel Shames

Director, Pricing & Procurement

CV International, Inc.

 

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Rachel serves as Director, Pricing and Procurement for CVI. Her responsibilities include vendor selection, contract management and negotiation, transportation pricing, FMC compliance, and international agent network management.

Rachel began her career in international shipping with CMA-CGM America. She joined CVI in 2011, gaining experience in various departments with a focus on inside sales and marketing for the company. In 2014, Rachel assumed the role of Manager, Transportation, working on service procurement and development of client proposals. She has served in her current position since 2018.

A native of Norfolk, Virginia, Rachel earned her bachelor’s degree from the University of Michigan in 2005. She holds a Master of Business Administration with a concentration in Maritime and Supply Chain Management from Old Dominion University.

– Rachel Shames, Director, Pricing & Procurement, CVI
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