Spotlight on trade hurdles likely to create disruption across the US logistics network with possible worker strikes in the UK and Germany, factory shutdowns in China due to the heatwave, and port congestion.
Highlights on the USA coming up with the Chips and Science Act, heightened demurrage charges in the USA compared to the global trend, reefer freight rate rises due to equipment shortages, and more.
Trending discussion on the Federal Maritime Commission planning to involve emergency powers granted by the 2022 reform of the Ocean Shipping Act to enable sharing as a solution to fight port congestion.
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Port congestion has been an omnipresent issue across the globe. The CNBC U.S. Supply Chain Heat Map shows a slight reprieve this week with vessels at anchor. There is an 18.5% drop in congestion, from 70 down to 57 vessels waiting for berths at East Coast ports. The queue at the New York and New Jersey ports has improved from 15 ships to 9 vessels over the course of the week. 30 vessels are still queued at Savannah and 23 are anchored at Houston. It is to be seen if this trend continues. Meanwhile, the US supply chain is facing major trade hurdles due to German worker tensions and the heatwave-induced factory shutdowns in China.
Negotiations between the trade union Verdi and the Central Association of German Seaport Operators (ZDS) remain inconclusive. The last round of negotiations is scheduled for August 22nd. If both parties fail to reach a compromise in this tenth round of negotiations, the port workers could strike again.
The Port of Felixstowe, the U.K.’s largest container port, is also likely to see worker strikes against the ongoing pay dispute. This will likely worsen the already stressed situation across major ports. Congestion, vessel schedule, and intermodal operations are already a mess and further strikes will just contribute to it. The situation is likely to generate a massive supply chain backlog and we might have to wait for Q1 of 2023 before things get better.
Meanwhile, a heat wave in China has led to major power cuts across manufacturing centers. Power limit notices for manufacturers in Changzhou, Nanjing, Nantong, and other regions in Jiangsu province have Worldwide Logistics alerting import clients in an email that, “The sudden orderly power consumption notice has made the supply chain more challenging under (the) current situation of (the) COVID -19 epidemic.”
Key Takeaway
The Chinese power cuts are forcing industries to operate only a few days a week. Some factories have shut down for a few days to deal with the power rationing. In the long run, aluminum, copper, and steel manufacturers are likely to be adversely affected. This is also likely to create a backlog and disrupt supply chains by delaying fulfillment for days if not weeks.
The holiday season is just around the corner and retailers, manufacturers, and shippers need to plan their schedules with room for these major disruptions. Air capacity is increasing, especially out in China and Vietnam. Logistics stakeholders need to factor in delays due to possible port strikes and congestion. Many players are choosing to ship their cargo by air, to fight against the uncertainties on land or via sea.
Highlights
- The USA has come up with the Chips and Science Act, to ensure that they maintain the rights to produce the latest semiconductor chips for enabling the latest technology. This is also a move to ensure that China does not gain a monopoly over chip production.
- Late container charges known as detention and demurrage (D&D) in the United States are the highest in the world, according to a recent report by Container xChange, and are out of sync with D&D charges that have been falling around the globe.
- Equipment shortages have helped prop up freight rates for reefers, even as dry container prices continue to decline. Reefer freight rates have remained high despite an apparent tail-off in demand on other trades.
- The capacity size gap between the largest carriers and the rest of the field is now bigger than ever, according to data carried out in the latest weekly report from Alphaliner. The top 10 carriers operate 21.8m TEU, versus 2.5m TEU for the next 20 ranked lines, a decade ago.
Trending
Port congestion has been a major issue faced by the global logistics industry, especially post-COVID-19. Other events like the Russia-Ukraine war have since ensured uncertain schedules for ferrying cargo. Amidst COVID-induced lockdowns and testing happening across the world, it is always difficult to predict where the next disruption will pop up. As a solution, the Federal Maritime Commission is considering invoking its newly granted emergency powers under the 2022 reform of the Ocean Shipping Act.
This act gives them the ability to require data sharing among terminals, truckers, carriers, and other parts of the shipping industry. The Department of Transportation shared how their new initiative to increase the flow of data across the supply chain was helping to address challenges. Learning from this, the Federal Maritime Commission said it would consider if data sharing would help to alleviate the persistent challenges of port congestion.
The commission noted that despite efforts during the pandemic, pockets of congestion persist. If the commission issues an emergency order, common carriers and MTOs would be required to share directly with relevant shippers, rail carriers, or motor carriers information relating to cargo throughput and availability.
Data sharing among ports and stakeholders could ensure more accurate communication, ensuring that cargo is collected in a timely manner. A federal solution to regulate port traffic and reduce congestion through data sharing might just bring more insights into the system and help authorities find loopholes that are being missed out right now.
