Transit times for containers moving between ports in China and their counterparts on the US West Coast declined sharply in March offering further relief for shippers after two tumultuous years, according to a new report from digital freight forwarding platform, Shifl.
It said freight rates on the principal trade lanes between China and the US also softened on the back of significant declines in January and February.
"The biggest port complex in the US, Los Angeles/Long Beach, is finally showing signs of heading towards the 'new normal,' whatever that might look like in the post-pandemic landscape," said Shabsie Levy, CEO, and founder of Shifl.
"Transit times and delays at the berth are both moving in the right direction with gate-out times reaching the sorts of levels we were used to in the busiest months pre-pandemic."
Levy noted that the Federal Reserve's recent move to raise interest rates to address concerns about inflation could also result in a slowdown in retail demand at a time when inventories appear to have reached levels last seen in March 2020.
"It appears that after two years of turmoil shops are finally fully stocked. What happens next on the world's most important trade lane depends on how fast the Fed puts the squeeze on inflation," the Shifl chief added.
The Federal Reserve raised interest rates for the first time in more than three years on March 16, signaling its intention to bring an end to two years of stimulus. Six further rate increases are planned this year to arrest inflation rates that have risen to their highest rate for more than 40 years.
The Shifl report noted that with inventories in the US reaching US$658 billion at the end of January, shippers have put the brakes on the "frantic scramble" for space with a notable impact on freight rates between the world's two largest economies.
The recent increase in fuel prices has also added to the reluctance and worries of shippers in placing new orders.
Shifl said consumers are now forced to spend more on fuel which might result in a further decrease in consumer spending.
Declining freight rates
"The sharp decline in freight rates is likely to continue as pressure for space subsides, especially given the already high level of retail inventories," the report said, adding that freight rates for a 40" container on the spot market between China and both the US west coast and US east coast have dropped by around 50% so far this year from its peak.
"The decline is expected to continue while retail inventories remain at current levels. The last time retailers were holding onto more stock (US$662 billion) was in March 2020, just before restrictions were placed on global movements as a consequence of the pandemic," it added.
Shifl said with high retail inventories taking the pressure off shippers, there are signs of respite for those battling with the significant problems still being felt in the supply chain.
It added that in the last three months, the principal indicators have been in sharp decline as the industry has thrown resources in a bid to unblock bottlenecks in US ports and railways.
Worst is behind for China-US route
"There are signs that the worst is behind the trade between China and the US West Coast, with transit times slashed by 21 days from the peak of 52 days in December to 31 days in March," Shifl said, adding that transit times from China to Los Angeles were down 20% from 39 days to 31 days between February and March.
Transit times to the US east coast have also been more stable over the last 12 months hovering between 33 and 45 days. Pre-pandemic transit times on this route were around 27 days.
The report further said that port delays have declined as services have started normalizing.
Shifl said as shippers worked their way through the backlog, dwell times in the ports were also improving.
"Containers in Los Angeles/Long Beach and New York/New Jersey were now taking 4 days to leave the port compared to 11 days and 5 days respectively in October last year," the digital freight forwarding platform added.
