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Industry Update June 2022

Tag: COVID-19

Industry Update June 2022

June 16, 2022
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| Categories: Issue Briefing
UTC Overseas Industry Update April 2022: Global trade is shifting, and it's getting more difficult to transport cargo from Point A to Point B. Here's 5 things you need to know today.

Labor negotiations, looming energy crunches, and more lockdowns? Current events are changing the landscape for tomorrow's supply chain.

Here's 5 things you need to know today.

    • USWC labor negotiations
    • Freeport LNG explosion will have major ripple effect on global energy supply
    • China’s COVID-Zero policy & ongoing lockdowns
    • Uyghur Forced Labor Prevention Act: US CBP will start enforcing June 21
    • German labor negotiations
Get in touch with UTC today to talk about your shipping needs

Labor negotiation déjà vu: Are we in for a repeat of 2014-2015?

Contracts for over 22,000 port workers employed at 29 US West Coast ports will expire on July 1. Originally negotiated over nine tense months in 2014-2015, the negotiations resulted in work slowdowns and lockouts that sent a ripple effect through the supply chain. In late Nov 2021, the ILWU rejected an extension.

    • The ILWU and PMA have been negotiating since early May, with a brief 10-day break Both organizations have agreed to a media blackout. (The Loadstar)
    • In a joint statement on June 14, ILWU and PMA stated that they are both committed to reaching an agreement and keeping cargo moving without disruption during the negotiation process, as they expect talks to extend beyond the July 1 expiration date. (JOC)
    • Experts say that automation is the hot-button issue during these negotiations. The ILWU is opposed to automation, stating it will take jobs away. PMA advocates for automation to improve efficiency: in 2021, the ports of Long Beach and Los Angeles were ranked 369 and 370 out of 370. (World Bank Container Port Performance Index 2021)
    • Just before negotiations, PMA released a report on the benefits of automation, finding that automated terminals processed containers twice as quickly as conventional ones, while paid worker hours rose by almost one-third. (Supply Chain Brain)
    • Existing supply chain issues, like disruptions in rail service and shifting vessel schedules, along with the possibility of upcoming congestion, shortages, and slowdowns has led to more ships avoiding the USWC in favor of East and Gulf Coast ports. USWC ports handle over 40% of containerized trade with East Asia. (Supply Chain Brain)

As Summer Comes into Full Swing, Energy Crises Loom

    • After an explosion in an over-pressurized pipeline on June 8, Freeport LNG reported on June 14 that the facility is entirely offline, hoping to resume partial operations in 90 days. The plant expects to have completed all repairs and be fully operational by the end of 2022. Freeport LNG represents almost 20% of the US’ LNG processing capacity. (CNBC)
    • The plant had been operating close to full capacity, forgoing regularly scheduled maintenance to maximize output. The explosion impacted the pipe racks that transfer LNG to storage and dock facilities. No liquefaction trains, storage tanks, dock facilities, or LNG process areas were damaged. (NYT)
    • This will result in widespread energy crunches in Europe, where buyers have been seeking alternatives to Russian gas. In recent months, ~70% of Freeport’s exports have gone to the European Union and Britain. (Reuters)
    • The June 14 announcement that Freeport LNG would be offline until September was compounded by news of reduced LNG shipments to Germany via Russia’s Nord Stream pipeline due to planned maintenance. Europe previously relied on Russia for 40% of its gas supplies. (NYT)

China’s COVID-Zero policy continues to cause disruptions

Less than two weeks after lifting lockdowns, Beijing and Shanghai are imposing new restrictions and mass-testing measures, raising concerns that stricter lockdowns may once again be on the way.

    • Shanghai briefly placed the majority of the city on lockdown to conduct mass testing, causing residents to rush to stock up on basic supplies. (Bloomberg)
    • A survey of 130 US businesses with operations in Shanghai has revealed that many have resumed operations, but activity levels are far below normal (Bloomberg)
    • Truck flows in Shanghai had recovered by almost 80% since lockdowns were eased on June 1. However, many truckers are still cautious about traveling to certain regions, facing rigid requirements to produce a negative COVID test and traffic permit, (FreightWaves)
    • Experts anticipate USWC port congestion ahead and are already seeing measures taken to shift deliveries to East and Gulf Coast ports to avoid potential delays. Once Shanghai fully reopens, drayage rates in China will increase, resulting in a wave of cargo that could overwhelm the Post of Los Angeles and Long Beach. As logistics managers are moving more containers to the East and Gulf Coast, ports are adjusting for the anticipated increase with additional gate hours and pop-up container storage lots. (FreightWaves)

Uyghur Forced Labor Prevention Act: Imports from Xinjiang not welcome after June 21

Starting June 21, US Customs and Border Protection (CBP) will begin enforcing the UFLPA, banning all imports from Xinjiang Province, China from entering the US.

    • The UFLPA establishes a “rebuttable presumption” that all products imported from the region were produced using forced labor. (Material Handling & Logistics)
    • On June 13, CBP released Operational Guidance for Importers to prepare for UFLPA enforcement. The guidance specifies that all enforcement actions will be taken on a case-by-case basis; CBP will review each shipment to determine any ties to the Xinjiang Uyghur region or other use of forced labor. (JD Supra)
    • Prior to the June 21 enforcement deadline, CBP issued “known importer letters” to several importers who have previously imported merchandise subject to the impending presumption and ban to encourage them to take steps to address their supply chain before enforcement goes into effect. (Material Handling & Logistics)
    • Several Chinese manufacturers have responded to the crackdown by creating supply chains outside of Xinjiang to cater to the US market. However, this has been met with skepticism as it is well-known that Uyghurs are transported to various locations throughout China to work in factories as contracted labor and that other Chinese people outside of Xinjiang are also working under forced labor conditions. (Material Handling & Logistics, S&P Global)

German ports enter into contentious labor negotiations

Port employer Central Association of German Seaport Companies (ZDS) and ver.di, the union representing dock workers, are negotiating to hold off a strike that would disrupt already stressed operations.

    • Talks broke down over the weekend as the union was not satisfied with the offer ZDS brought to the bargaining table. In light of the rising cost of living in Germany, ver.di felt the offer was inadequate, while ZDS felt it was extensive. A new date for negotiations is expected to be announced in the next few days.
    • A warning strike was held for several hours on June 9. Given global supply chain disruptions, ZDS called the short strike “absolutely irresponsible.” Any further action by the union will impede the already strained supply chain in Northern Europe. Delayed ships are expected to arrive at German ports in the coming weeks, which will put further pressure on operations, and other European ports are heavily congested and unable to accept transshipped cargo.
    • The negotiations affect 12,000 workers at the ports of Hamburg, Bremerhaven, and Lower Saxony. (GCaptain)

With international and local expertise, diligent risk assessment, and multi-modal capability, our teams will work with you to keep your cargo moving. Contact UTC today to develop a transportation strategy that works best for you.

UTC's experts are dedicated to providing you with the most innovative and cost-saving logistics solutions.

Contact us today!

Read More

Industry Update April 2022

April 22, 2022
| No Comments
| Categories: Issue Briefing
UTC Overseas Industry Update April 2022: Global trade is shifting, and it's getting more difficult to transport cargo from Point A to Point B. Here's 5 things you need to know today.

Global trade is shifting, and it's getting more difficult to transport cargo from Point A to Point B.

Here's 5 things you need to know today.

    • Shifting port congestion & backlogs
    • Trucking in the US
    • KwaZulu-Natal Flooding
    • China's COVID lockdowns continue
    • Looking ahead: German Rhine water levels critically low
Get in touch with UTC today to talk about your shipping needs

Shifting port congestion & backlogs

As COVID restrictions, labor shortages, and consumer spending dominate the headlines, port congestion is not  disappearing – it is just shifting. A sobering report from Windward, the maritime AI company, indicates that 20% of the world’s containers are currently stuck in port congestion (Maritime Executive).

Congestion has eased on the USWC, but has shifted to Gulf and East Coast ports.

    • The slowdown in China is providing temporary relief to US ports on both coasts, as well as in Europe, but will likely be followed by a tsunami of deferred cargo once the lockdowns are lifted. (FreightWaves)

Sanctions against importing Russian goods have strained the European supply chain.

    • European ports, railroads and trucking junctions are seeing increased congestion since mid-February. Isolating, storing, and inspecting containers carrying Russian goods, has resulted in a backlog of over 4,500 containers.
    • Of all containers passing through Rotterdam, about 10% are linked in some way to Russia. About 30% of Russian crude oil, 25% of LNG, and 20% of oil products and coal are imported via Rotterdam. (Fortune)
    • Russia’s invasion of Ukraine and the EU’s resulting sanctions have led to production halts and components shortages for many companies, particularly automotive manufacturers and their suppliers. (Bloomberg)

Capacity remains tight and unpredictable in India; lockdowns in China are hampering local manufacturing and global trade.

    • The economic crisis in Sri Lanka is causing a severe shortage of container trucks (due to fuel scarcity) at Colombo Port, which handles the bulk of cargo transshipped in and out of the region. Several carriers are skipping the port, or will only accept shipments “Freight Prepaid,” due to a shortage of USD and the devaluation of Sri Lankan Rupee (LKR). Alternate ports of Mumbai and Vallarpadam are seeing increased volume due to diverted ships. (JOC, Logistics Update Africa)
    • Lockdowns in China are impacting manufacturing, production, and global trade. Windward, a maritime AI firm, estimates that 25% of all container ships are waiting offshore at Chinese ports (Maritime Executive). Import dwell times for containers at Shanghai marine terminals has increased nearly 75%. Export storage time has fallen. (FreightWaves)
    • More than 90% of trucks supporting import/export deliveries are out of action because of the restrictions. Slow cargo pickup has resulted in long container dwell times, leaving less room to place arriving import boxes. Decreased terminal efficiency is causing container vessels to wait at anchor to berth while others skip the port altogether.
    • Manufacturing hubs in Vietnam and Cambodia are suffering a shortage of Chinese components for manufacturing industries. Pharmaceutical companies in India, which source 70% of their active ingredients from China, are facing limited supplies. (FreightWaves)

Flooding in southern Africa has led to a backlog at the Port of Durban, with several carriers attempting to redirect to alternate ports. Alternate ports of Cape Town, Port Elizabeth and Ngqura handle significantly lower volumes and will likely suffer congestion as more ships are being redirected. (FreightWaves)


Trucking in the US

Several factors have contributed to a high spot truck rate: clean energy initiatives, increased diesel prices, increased salaries to attract truck drivers, maintenance and repair, and new purchase orders. In addition to the above, many carriers signed contracts in the first quarter at high rates to guarantee capacity. However, many experts state that we are at a peak and will see a trucking capacity glut in the second half of 2022.

    • Market volatility and higher fuel prices make it unclear how far or for how long truckload spot rates might drop. Declines in rates have been met by increases in fuel costs and surcharges that could affect truck capacity moving forward. (JOC)
    • Operating expenses have increased and the price of diesel is rising (FreightWaves, CNBC, FreightWaves)
    • March saw soft truckload volumes, an oversupply of trucking capacity, and a low rejection rate. (FreightWaves)
    • Consumer spending and operating costs are key factors in how this will play out. Experts anticipate that people will spend more on experiences than material goods as restrictions lift. However, even if consumer spending on physical goods decreases, if operating and maintenance costs continue to rise, it will cut into the anticipated spot rate decrease.

KwaZulu-Natal Flooding

Torrential downpour in KZN province triggered massive flooding and mudslides that have disrupted services at South Africa’s largest port, Durban. Several areas reported as much as 13 inches of rain in less than 24 hours, resulting in a devastating loss of life and wiping out critical infrastructure.

  • Port of Durban has resumed operations, but the 36-hour closure of the port resulted in a backlog of more than 23 cargo ships waiting at anchorage outside the port, and a backlog of between 8,000-9,000 containers, which will take between 5-9 days to clear. In addition to wiping out critical infrastructure providing access to the Port, floodwaters brought a variety of natural, household and industrial debris into the harbor, which was cleared after 72 hours of dredging. (US News)
  • Floods caused extensive damage to Bayhead Road, which handles 13,000+ heavy vehicles per day and links the port operations to the rest of the country. The damage to roads leading to the port, railroads, and warehousing facilities, is estimated to total 10 billion rand ($675m). Damage to the rail system could take up to eight weeks to repair fully. (M&G South Africa)

China's COVID lockdowns continue

With many cities in China experiencing the most extensive lockdowns since the initial outbreak in early 2020, carriers are shifting strategies to keep on schedule. The ripple effect of the lockdowns is being felt throughout the world:

    • COVID lockdowns are spreading as surges of new cases are affecting more cities. Guangzhou, Kunshan and Ningbo have all initiated partial lockdowns, mass COVID testing and/or other low-level restrictions.
    • Truck rates have soared. Due to restrictions, more than 90% of trucks supporting import/export deliveries are out of service. Special permits and negative COVID tests are required to get in and out of cities or enter certain zones, resulting in huge traffic jams at ports. There are reports of truckers waiting up to 40 hours at certain highway entrances to pick up cargo.
    • Lack of labor and cargo has caused air carriers to announce widespread cancellations, along with some ocean carriers skipping port calls to avoid delays. Experts anticipate ocean carriers may temporarily idle vessels or cancel outbound Asia sailings.
    • Many carriers are unloading temperature-controlled and dangerous goods containers at other ports due to lack of warehousing capacity in Shanghai; others are not accepting new bookings.
    • Rerouting cargo has become challenging as scattered outbreaks have led to a virtual ban on truck drivers transporting cargo from low-risk areas to medium- or high-risk areas. No cargo will be accepted if the driver has been to or picked up cargo from medium- or high-risk areas within the last 14 days.

 


Looking ahead: German Rhine water levels critically low

Barge transportation on the Rhine River is critical to Europe’s supply chain, linking German and Swiss industry with Rotterdam. Without significant spring rainfall, water levels may drop dramatically in late summer, causing a repeat of the crisis of 2018.

    • At the end of March, the water gauge stood at just 95cm at Kaub, a major chokepoint for barge transportation connecting north and south Germany. Typically, the river carries twice as much water at this time of year. Waterway traffic is already beginning to slow down due to unusually low water levels for this time of year after a mild and dry winter. (Bloomberg)
    • Energy plants are reporting shortages due to shipping restrictions on the Rhine. Current levels mean that a typical 110m barge carrying diesel fuel or chemical products can only transport about one-third of its capacity to avoid getting grounded.
    • A low water surcharge is imposed when water levels drop under 150cm, increasing the cost of freight significantly. An “extreme low water” alert is issued if it drops under 80cm. Traffic must stop if the water drops below 40cm.
    • Over 100 trucks would be required to replace the transportation capacity of a barge. With diesel prices rising and potential shortages looming, this could have an even larger impact than in previous years.

 

With international and local expertise, diligent risk assessment, and multi-modal capability, our teams will work with you to keep your cargo moving. Contact UTC today to develop a transportation strategy that works best for you.

UTC's experts are dedicated to providing you with the most innovative and cost-saving logistics solutions.

Contact us today!

Read More

Industry Update: 5 Ways Current Events are Re-Shaping Global Trade

March 24, 2022
| No Comments
| Categories: Issue Briefing

“Supply chain issues” has become a household buzz phrase. Ships waiting to unload cargo, workforce shortages and negotiations, capacity and warehousing issues – but what does it all mean when it comes to your cargo?

What you need to know:

    • Bottlenecks at the Ports of LA and Long Beach have eased, but delays are shifting elsewhere
    • China's targeted lockdowns are in flux due to Omicron
    • The Russia-Ukraine conflict has resulted in many trade lanes being diverted or cancelled across all modalities
    • Recent cyberattacks have crippled operations of several transportation firms
    • Looking ahead: Upcoming union negotiations threaten to strain the supply chain further
Get in touch with UTC today to talk about your shipping needs

Bottlenecks at the Ports of LA and Long Beach have eased, but delays are shifting elsewhere.

  • There were 109 ships waiting to berth at LA/LB in early January; now there are just 43. This is partly due to the annual slowdown during the Lunar New Year holiday and recent COVID lockdowns in China. (FreightWaves)
  • Ports on the East and Gulf Coast are starting to experience backlogs, with 63 ships waiting to berth, with another 8 waiting in Freeport, Bahamas.
  • Services from Shenzhen and Shanghai to the Ports of NY/NJ in January and February had an average wait time of 20.9 and 14.5 days, respectively.

China's targeted lockdowns are in flux due to Omicron

  • On March 21, Shenzhen operations resumed after a weeklong lockdown. However, COVID test and quarantine requirements have led to a workforce shortage in all modalities – trucking, dock workers, etc. Ongoing disruptions in the region have caused shipping carriers to omit certain ports to keep schedule disruptions at a minimum, leading to a backlog of 65 ships waiting to berth at the Port of Shenzhen. (Port Technology)
  • Additional lockdowns have been imposed over the past two days in major industrial hubs. There are rumors of an impending city-wide lockdown in Shanghai as daily case numbers rise; the city currently has targeted neighborhood and building quarantines in place. (Reuters)

The Russia-Ukraine conflict has resulted in many trade lanes being diverted or canceled across all modalities

  • Closed airspace has forced airlines to rethink their routes, and artillery fire and sanctions have handicapped heavy lift fleets and cargo freighters, tightening airfreight capacity worldwide.
      • The AN-225 is destroyed; nine other planes remain grounded at Hostomel. Russian forces have also shelled Antonov’s manufacturing and storage facility holding the second, 70% completed, AN-225 hull. Five AN-124s are operational outside of Ukraine. (Aviation 24)
      • Volga-Dnepr Group has effectively shut down, folding two subsidiaries and grounding all aircraft but two AN-124s. (The Loadstar)
  • Over 1.5M TEUs of rail freight that transit the New Silk Road between China and Europe annually are looking for alternate routes, likely resulting in a shift to ocean freight. (Rail Freight)
  • Sanctions against Russian goods will impact a wide range of businesses: Russia and Ukraine account for one-third of global wheat exports, Ukraine is a major producer of heavy metals used in semiconductor manufacturing, and Russia is a major exporter of titanium, which is used widely in the aerospace industry. Russia is also a critical exporter of natural gas and crude oil.

Recent cyberattacks have crippled operations of several transportation firms

  • In November 2021, a cybercrime intelligence firm, Intel 471, reported that cybercriminals were trying to sell network access to multiple transportation, shipping, and logistics firms. Since then, Hellmann Worldwide was targeted in December, Expeditors International in February, and Hapag-Lloyd in March. (Duo)
  • Cyberattacks in the maritime industry that lead to ransom payment average $3M USD. (Container News)

Looking ahead: Upcoming union negotiations threaten to strain the supply chain further

  • Formal contract negotiations between the International Longshore and Warehouse Union (ILWU) and Pacific Maritime Association (PMA) will begin in the spring. The current contract expires July 1, 2022, and experts anticipate negotiations will be contentious. (JOC)

The bottom line: Getting your cargo from Point A to Point B is not as simple as it used to be. UTC can help. With international and local expertise, diligent risk assessment, and multi-modal capability, our teams will work with you to keep your cargo moving.

UTC's experts are dedicated to providing you with the most innovative and cost-saving logistics solutions.

Contact us today!

Read More

Congestion & COVID Causing Chaos

February 1, 2021
| No Comments
| Categories: Point2Point
Container ships waiting in harbor due to unprecedented congestion
Point A to Point B

Moving containers from point A to point B has become more challenging.

Congestion at the ports is severe, COVID outbreaks are causing labor shortages, equipment shortages continue, and vessel delays are reaching all-time highs. Here is an overview of the factors affecting the industry.

Download the report here

Congestion Continues

The holiday surge has passed...

But with close to record volume on Asia to North America trade lanes, congestion at the ports is increasing.

  • Sea-Intelligence Maritime Analysis reports that global liner schedule reliability in December fell to 44.6 percent, down from 50 percent the previous month and 76.3 percent a year ago.
  • In LA and Long Beach, ships are stacked up and waiting 10 to 14 days to unload, creating congestion on the docks.
  • This congestion has caused schedules to be upended and has compromised reliability.
  • Export bookings against delayed ships are being held up, resulting in uncertain departure dates.
  • Carriers are continuously changing receiving dates, making it hard for truckers to know when they can reliably pick up containers. This is affecting turn times.
  • No one knows how long congestion will last, but it is not expected to abate until May or June.
  • Congestion is building at US East Coast ports and in European and UK ports as well.
  • Blank sailings are used during Chinese New Year as container movement slows to allow ports to catch up. This year, carriers minimized blank sailings to clear exports that are building at Chinese ports. Unfortunately, congestion at US ports is leaving carriers short on ships making it harder to clear the backlog in China.

COVID Concerns

Hundreds of ILW workers have come down with the virus.

Many others are quarantining due to exposure. Others are concerned about their health and not showing up for their shifts.

  • Worker allocations have been cut back, slowing loadings and unloadings and adding to delays.
  • An effort has been made by port officials, industry organizations, and maritime regulators to label these workers essential, rendering them eligible for vaccines since they are responsible for keeping the supply chain running, and any disruption would impact the economy.
Disinfecting containers
volatile rates

Rates are Volatile

Rates have reached record levels.

  • The bad news is that rates have reached historical highs.
  • The good news is that they remain steady and have not increased in weeks.
  • Many contract rates are not being honored.

Space is at a premium & there are heavy schedule delays

Availability is in short supply, making it difficult to secure space.

  • Vessels are overbooked, and in Shanghai, it is estimated that 37% of containers are being rolled.
  • Carriers are pushing premium services, but that is still no guarantee of having cargo loaded.
  • Hapag-Lloyd has already announced cancellations of 21
    eastbound sailings in February to restore schedule integrity.
  • Complaints about service levels and rising rates have attracted regulators' attention in the US, Europe, and Asia.
container ship delayed
containers 2

Equipment Shortages Continue

Shortages have especially plagued Europe and China while also affecting the US.

  • Equipment surcharges are being assessed to secure containers.
  • Carriers are giving priority to empty box returns to Asia since they can be turned around faster and placed back into service at a premium price.
Download the report here

At UTC, we work hard to keep your cargo moving.

Our teams of experts are in contact with carriers daily, and can help you navigate the changing conditions. Planning ahead, booking early, and working closely with your UTC representative will help you secure the most efficient options.

We value the trust you have placed in us, and thank you for your business.

Get in touch with your UTC representative

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