The current drop in demand and the lockdowns in China helped the US West Coast ports recover from the port congestion and resulted in a drop in total transit time to the West Coast ports in April, according to a new report from digital freight forwarding platform, Shifl.

It said the transit time from China to Los Angeles and Long Beach dropped by 85% from 50 days in Dec ‘21 to 27 days in April 2022.

Shifl noted, however, that although it is a significant improvement, this is still above pre-pandemic levels.

Congestion shifts to East Coast ports

"At the peak of West Coast congestion, customers shifted deliveries of future orders to East Coast ports at the time when they were performing better. Those shipments are arriving now, and as a result, the congestion has shifted to the East Coast," it added.

It said that transit to the port of New York went up from 40 days to 50 days representing a 20% increase for the same period and an 85% increase from pre-pandemic levels. 

"We however expect a relief in the East Coast congestion in the near future as the impact of blank sailings created by the decrease in demand and China lockdowns will be felt in New York, albeit little later than West Coast ports due to the naturally longer transit time," said Shabsie Levy, founder, and CEO of Shifl.

There is however the unknown outcome of the labor negotiations talks between the International Longshore and Warehouse Union (ILWU) and marine terminal operators due to begin on May 12.

Shifl said there has been "cause for concern" in the market that any breakdown in negotiations may cause disruptions in the US West Coast operations and add to East Coast congestion.

Container gate out times improve across both coasts

Meanwhile, the digital freight forwarding platform noted that while congestion outside the ports has shifted to the East Coast, the container gate-out times have been improving on both coasts.

It noted that Los Angeles/Long Beach gate-out times improved by 28% dropping from 5.74 days in January this year to 4.5 days in April while New York had a 47% drop in container gate from 4.25 days in January to 3 days in April.

Container spot rates are also on their way down. 

Shifl said the restrictions on truck movement and workers lowered China's industrial activity with exporters having a hard time delivering export containers to Shanghai port.

This has resulted in lower volumes flowing in the China-to-US trade lanes.

Shifl said container spot rates fell sharply on the back of the combined impact of reduced demand in the US and Chinese exports affected by the pandemic-induced shutdowns in Shanghai.

"The core reason for the continued drop in spot freight rates as we predicted previously is the reduced demand in the US which we are seeing from our customers' data as well. The price of a 40’ container continued to drop in April 2022 to US$7-8,000 for the China-US West Coast and around US$9-10,000 for the China-US East Coast," Levy said.

"Carriers have been trying to manage this drop in spot rates by implementing blank sailings while trying to lock shippers on longer-term contracts riding on the previous highs in hopes of extending their honeymoon period," the Shifl chief added.

The US GDP fell 1.4% in the first quarter of 2022, which has earlier raised concerns for economists and analysts and was felt across the Transpacific corridor as discussions of a freight recession and cooling ocean freight spot rates hit the headlines.

The US saw an extremely high volume of imports in Q1 increasing 4.77% from an already record-high Q4 last year on the back of previous orders and consumer demand. 

The Chinese COVID-19 situation, on the other hand, continues to worsen as movements within Shanghai remain restricted, shackling manufacturing output, trucking activity, and port throughput. 

"With Beijing teetering at the brink of a similar situation, the Chinese mainland might have problems returning to the previous smooth flow of cargo movement. This has been reflected in the cargo volumes from China sliding over May, and shippers believe the situation will remain murky for a while," Shifl said, noting that this has caused transit times to be reduced drastically.