Spotlight on the Port of New York and New Jersey adding tariffs for ocean carriers to battle congestion.
Highlights on the supply chain effects of China’s military drill measures, inflation’s hold on the infrastructure bill, and more.
Trending observation on transportation capacity rising again in July as pricing declines.
Your Weekly Spotlight
The Port of New York and New Jersey is the largest port complex on the East Coast and the third-largest in the US. Just like other ports across the country, the Port of New York and New Jersey processed record volumes throughout the pandemic. It too faces the ill effects of port congestion and supply chain disruptions. Having dealt with import containers waiting longer at terminals, the Port of New York and New Jersey announced new tariffs related to empty containers and export volume.
Loaded and empty containers dwelling long at port terminals will have to shell out a quarterly “container-imbalance” fee. This tariff will be active starting September 1, pending the mandatory federal 30-day notice. According to this new tariff structure, ocean carriers will be fined $100 per container (for not moving empty containers).
The port’s new container export levels mandate that export volumes must equal or exceed 110% of an ocean carrier’s incoming container volume during the same period. If that benchmark is not met, the ocean carrier will be assessed a fee of $100 per container for failing to hit this benchmark. Both loaded and empty containers are included in the import container count. Rail volume is excluded.
The port has been using surrounding land to make room for the excess containers. They created temporary storage space for empty and log-dwelling containers in a 12-acre lot with the Port of Newark and the Elizabeth-Port Authority Marine Terminal. Authorities are also researching additional areas for storage space.
Key Takeaway
The Port of New York and New Jersey has been facing record import volumes and is in dire need of container space. But thanks to congested terminals and empty long-dwelling containers hogging a lot of the space available, finding space for new incoming cargo is a challenge.
Empty containers sitting in and around port lots are directly affecting regional and national supply chains. Not only does the lack of space result in port congestion, but it also leads to slower delivery timings and a reduction in productivity. Ocean carriers need to evacuate empty containers quickly and at higher volumes to free up much-needed capacity for arriving imports in order to keep commerce moving through the port and the region.
Highlights
- China’s announcement of military drills around Taiwan as U.S. House Speaker Nancy Pelosi visits the island is already having ripple effects across global supply chains, prompting detours and causing delays in energy shipments.
- Thanks to inflation, the infrastructure bill passed by the Biden administration last year is causing debate. Better infrastructure, in the long term, will enhance the supply side of the economy and help keep inflation low, but in the short term, the effect is exactly the opposite.
- The traditional peak season in ocean shipping starts in the month of August. The current backlog of containers at the ports will only increase congestion and add wait time for incoming vessels. For this peak holiday season, shippers can expect volatility with trade routes experiencing congestion and increased container rates.
- Port congestion and longer container wait times are resulting in higher ocean shipping spot rates on some trade routes, and price increases which ultimately flow through to the consumer.
Trending
Shippers had been observing a decline in ocean spot rates and in premium surcharges across various trade routes, mainly because container demand had softened, and overall consumer demand had also reduced due to tightened purse strings. This trend had seemingly reversed. But supply chain data, released Tuesday this week, showed cooling in the transportation markets.
Essentially pointing to transportation capacity becoming available in July at lower costs, the July Logistics Managers’ Index (LMI) fell 4.3 percentage points to 60.7. This is the lowest reading in the data set since May 2020. A reading above 50 indicates expansion while a reading below 50 indicates contraction.
The transportation prices subindex dropped 11.8 points in the month to 49.5. This was the first time in two years the pricing data was in contraction territory. However, the report noted that the exit rate for the month was 8 percentage points higher than at the beginning of the month. Transportation prices logged a 54.7 reading in the last week of July.
Inversely, the 12-month forward-looking survey showed respondents believe transportation prices will actually remain high. The survey returned a reading of 58.7, which was 0.9 lower than June’s reading. The elevated rate expectation supports recent commentary from the C-suites of the nation’s biggest trucking companies. During the second quarter, many trucking executives said they expect rates to remain high as they continue to pass through cost inflation to shippers.
