Container shipping peak season between Asia and North America this year will be early and less pronounced with inventories running high, demand tapering and persisting supply chain disruptions.
Industry players also expect the easing demand and increasing capacity to impact rates in the trans-Pacific lane as inflationary pressures drag consumer sentiment and put a brake on spending, prompting US retailers to draw down excess inventories.
Peak shipping season traditionally starts in mid-August and stretches to the end of autumn, usually until Thanksgiving in the United States, the fourth Thursday in November – but this year, the early peak season rippled into the trade beginning in May.
“The peak season that is traditionally September-October seems to have arrived earlier this year,” Cliff Pyron, chief commercial officer at Georgia Ports Authority (GPA) in Savannah, told Asia Cargo News, noting that the port handled 18% more cargo in July compared to the same month in 2021.
“We continue to see elevated levels of inbound cargo, but imports on the water headed to Savannah have moderated slightly from their high-water mark in mid-July. This leading indicator implies strong yet gradually easing volumes in the months to come,” he added.
Lower rates, easing demand
Pyron said rates are also expected to taper between Asia-North America in 2022’s peak season compared to the highs seen a year ago as capacity had been growing steadily on the trans-Pacific lane.
“Rates should decrease versus last year as demand wanes and capacity increases” as congestion clears and new vessels are delivered, the GPA CCO added. “We anticipate volumes in August-October to be up year-over-year and even more so versus pre-Covid.”
“Peak season this year will be earlier and less pronounced since it will be compared to already elevated volumes,” Pyron added.
Meanwhile, US East Coast ports such as the Port of Savannah have seen a capacity pile up from vessels looking for alternative gateways as major West Coast hubs continue to face disruption issues.
“Because of worries over the labour negotiations with the ILWU (International Longshore and Warehouse Union), beneficial cargo owners started their peak seasons back in May this year. In fact, based on the number of containers on the water destined for Savannah, GPA is starting to see volumes tail off and expects to see volume easing over the next few months,” Pyron said.
Pyron added that shippers find numerous advantages in using East Coast hubs, including accessibility to 70% of the US population and infrastructure ready to accommodate the surge in inbound containers.
Capacity moving to East Coast
Peter Sand, the Copenhagen-based chief analyst at Xeneta, also noted the continuing shift in container shipping capacity on routes from Asia to the United States as increasing volumes arrive on the East Coast and trade declines into major West Coast hubs.
Sand said this is impacting congestion, which is now hitting reliability on vessels heading to the East Coast, while western destinations show “much-needed improvement.”
“The situation has now deteriorated to the point where less than one in five container ships currently arrive on time on the East Coast,” the chief analyst at the ocean and air freight rate benchmarking and market analytics platform added.
“We’ve seen a stretched supply chain on the U.S. West Coast for a protracted period,” Sand said. “This has been frustrating for both the carriers and cargo owners, with, at peak times, vessels having to wait for three weeks or more for a berth at Los Angeles and Long Beach. That congestion has provided an impetus for carriers to adjust capacity and try to side-step bottlenecks, looking east instead.”
Sand said in an ocean freight update that, in the past three months, capacity between the Far East and the US East Coast rose by 18.9% year-on-year, translating to an average capacity of 210,000 TEU over the 12-week period to July 24, equivalent to carriers adding four 8,750 TEU ships a week against 2021 trades.
“This is a major shift,” he says. “But, unfortunately, it also comes with major repercussions. As more vessels and cargo head east, the chain on this side of the country is pressurized, and there’s a price to pay in terms of reliability. So, in a way, the East Coast becomes a victim of its own success, and the West Coast has the breathing space to recover somewhat.”
Despite the shift, the West Coast still enjoys a majority share of capacity from the Far East, Sand added, or 61.3% of capacity (dropping from 66.1% on July 24, 2021).
Improvement in cargo movements on West Coast
Meanwhile, the Port of Long Beach signalled optimism for the peak season with expectations of another record volume this year.
The second-busiest container seaport in the United States pointed out that terminals are moving huge amounts of cargo basically every month now.
“We’ve learned in recent years there is no peak season. The fluid nature of e-commerce and overnight or one-day shipping has contributed to smoothing deliveries across the entire year,” Mario Cordero, executive director at the Port of Long Beach, told Asia Cargo News.
“Still, we expect continued high levels of imports as retailers meet the demand for back-to-school shopping, and we are not seeing a decrease in the ships departing our partner ports in Asia.”
Cordero noted that as food and gasoline become more expensive in the U.S., this could push down disposable income for durable goods, which could slow imports with economists beginning to see signs of inflation wearing on consumer spending, with prices increasing at a 9.1% annual rate in June.
“Generally speaking, we have been handling consistent cargo growth for most of the past decade. Starting in 2017, we have broken the annual record for containers moved four times, and we expect that to happen again for the current year,” the Port of Long Beach chief added.
Cordero also noted the significant reduction in backlog at North America’s busiest ports – Port of Los Angeles included. The Port of Long Beach chief said that compared to January, when more than 100 container ships were “slow-steaming” on the way to the San Pedro Bay ports complex or waiting some 150 miles off the coast, the number of vessels is now down to 31 ships queued up for the two ports.
24/7 operations sought
To further improve cargo movements at the West Coast ports, Cordero called for 24/7 processing of shipments across critical links of the supply chain, pointing out the need to build resiliency as the industry starts to bounce back from the impacts of the Covid-19 pandemic.
“The pandemic has changed the supply chain, and we’re all adjusting to that. With the supply chain impacted throughout the world, we know that beneficial cargo owners have been waiting longer for shipments to arrive. That’s why we believe it’s so important to continue to progress to a 24/7 model to build resiliency into the supply chain,” Cordero told Asia Cargo News.
“Ports in Asia have operated 24/7 for years. Consumers place orders around the clock with a single click and expect delivery within days or overnight. The transition won’t be fast or easy, but the national supply chain must collectively commit to working 24/7 to improve freight movement and reduce delays at our nation’s ports,” he added.
“It wouldn’t matter if we were open 24 hours while warehousing, trucking and other critical links are closed. That’s why we are working to see other segments of the supply chain increase their hours as well.
By Charlee C. Delavin
Asia Cargo News | Hong Kong
