Supply chains are poised to continue battles with port congestion, delayed deliveries, and high costs well into 2022. New COVID variants and pending worker strikes will add even more disruption to troubled freight operations across the globe. This disturbing trend may be indicating that a new normal is unfolding.
The challenges that laid the foundation
Shutdowns during the early stages of the pandemic exacerbated maritime shipping risk trends. With high COVID-19 infection rates among port workers negatively impacting operations, ports became bottlenecks with shipping container backlogs that delayed loading and offloading consumer goods across the globe. By mid-2021, the amount of time container ships spent waiting to be unloaded, particularly on the U.S. West Coast, was well above the pre-pandemic average.
In February, the number of container carriers in the official queue to enter the ports of Los Angeles and Long Beach — the nation’s busiest container port complex — dipped down into the double digits. That may sound like a sign of improvement, but those west coast dock workers are facing contract renewals, and are likely to strike during negotiations in July.
New challenges expand existing problems
Port congestion is fanning out across the country as importers seek to get around chronic bottlenecks. East Coast gateways in the U.S. are seeing increased wait times due to the surge of imports. Worker availability, Covid regulations, and storage space remain problematic in ongoing efforts to both keep up with demand and erase the backlog.
Port dependencies have been amplified by pandemic disruptions, including the soaring costs of ocean shipping rates that are expected to stay elevated well into 2022. Tight container capacity and port congestion mean that longer-term rates set in contracts between carriers and shippers are running an estimated 200% higher than a year ago.
Plan for permanent delays
Rates likely won’t come down until port congestion in China, Europe, and the U.S. recedes. Governments are intervening, but that change will come slowly. Last month, the U.S. Senate introduced the Ocean Shipping Reform Act aimed at promoting U.S. exports while curbing carriers’ power over both container service and equipment fees charged to shippers.
After a recent analysis of U.S. port congestion, American Shipper suggests supply chain pressures will feasibly persist into 2023, and says that goals to fully clear the queues in Los Angeles and Long Beach during 2022 are “unrealistic.”
With new Omicron variants creating a fresh wake of COVID-19 disruptions in Asia and looming labor disputes on the U.S. West Coast, port congestion and sky-high freight costs are not behind us. This 2022 trend should be part of your permanent long-range planning.