In this Jan 25, 2021 photo, shipping containers at the Port of Ipswich, operated by Associated British Ports (ABP) Holdings Ltd, against a backdrop of residential housing in Ipswich, UK. (CHRIS RATCLIFFE / BLOOMBERG))
Global ports are growing more gridlocked as the pandemic era’s supply shocks intensify, threatening to spoil the holiday shopping season, erode corporate profits and drive up consumer prices.
Bloomberg’s Port Congestion Tracker shows a typhoon in Asia spawned another wild week for shipping in a year with multiple challenges — a vessel wedged in the Suez Canal, a dozen major storms, rolling COVID-19 lockdowns disrupting key manufacturing hubs in Vietnam, a shortage of truckers and dockworkers, and a resurgence of consumer demand.
Concern is already mounting that holiday shoppers won’t be able to buy the gifts they want, dealing a blow to retail sales
Globally, RBC Capital Markets reckons 77 percent of ports are experiencing abnormally long times to turnaround traffic. The latest congestion won’t be isolated to Asia for long, as delayed ships loaded with merchandise soon start sailing for the US and Europe.
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As the Big Crunch of 2021 has repeatedly demonstrated, a bottleneck in one corner of the globe eventually exacerbates a logjam or compounds shortages in another.
President Joe Biden last week urged the LA port to run a 24/7 operation. In the UK, containers filled with goods and outbound empties were piling up so high at the key port of Felixstowe that at least one container carrier had reroute cargo through ports in mainland Europe.
That all spells trouble for the world economy. Concern is already mounting that holiday shoppers won’t be able to buy the gifts they want, dealing a blow to retail sales.
Companies are worried about their bottom line with executives at Tesla Inc, Target Corp and other S&P 500 companies mentioning “supply chain” a record 3,000 times during presentations as of Tuesday. And a lack of goods and costlier shipping mean further upward pressure on already heady inflation.
“Data on sea and air shipping costs, container throughput and transport utlization point to an ongoing supply shock for the global economy,” Michael Hanson, senior global economist at JPMorgan Chase & Co, told clients in a report on Thursday.
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Typhoons in Asia have tested an already-strained port infrastructure in US and the effects are rippling to logistics on land like trucking, rail and warehousing.
The Port of Savannah, Georgia, on the East Coast had 25 waiting ships versus just six in port late Thursday, leading all major ports with an 81 percent congestion rate. On the West Coast, the adjacent ports of LA and Long Beach had a combined congestion rate of 56 percent Friday, as ships waiting outnumbered the ships in port.
In Europe, ports in Rotterdam and Antwerp had blockage rates about half that level.
Ports are overwhelmed because they sit at the junctions of global trade where ocean freight gets transferred to some mode of land-based transportation. The supply snags are colliding with a demand surge — peak season for retailers to stock up before holiday shopping kicks off.
Consumer purchases of goods have stayed elevated in advanced economies and labor shortages have stretched trucking, rail and shipping liner capacity to their limits, creating bottlenecks of containers between the factory loading docks and store shelves.
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San Francisco-based freight forwarder Flexport Inc developed an indicator to help anticipate when the share of US consumer purchases on goods versus services will return to pre-COVID-19 levels. According to the latest reading released on Friday, there’s no sign yet that it’s easing up, so pressure on supply chains will continue at least to year end, Flexport said.
“Port congestion, equipment shortages and extreme container freight rates are just the symptoms of a deeper problem that includes trucking shortages and limited warehousing space,” said Simon Heaney, senior manager for container research at Drewry in London. “Covid has stressed all links in the chain and these issues take time to resolve as there is no latent capacity that can be turned on like a tap.”