We’ve posted warnings the past half year about the global supply chain steadily becoming more congested and the cost of shipping rising accordingly. In the past few months, more articles have published about shortages in everything from boba balls to garden gnomes. We highly recommend everyone to watch the video that the Wall Street Journal published a few weeks ago that describes the supply chain congestion.
As we near the May 1st Labor holiday in Asia, we want to highlight some important developments in recent weeks. As mentioned in previous articles, vessels are sitting at various ports for long stretches of time. Vessels at Los Angeles/Long Beach are anchoring for over one week before docking. The stress from this type of congestion have contributed to other congestion issues that I had previously mentioned
- With vessels unable to return back to Asia quickly enough, there is a massive equipment shortage (lack of empty containers) in Asia. The equipment shortage has now led to multiple carriers refusing to send containers via rail to inland destinations such as Minneapolis, Dallas, Kansas City.
- Certain terminals are now routinely closing off areas preventing containers from being picked up for days at a time.
- Certain terminals in Los Angeles/Long Beach don’t have appointments to allow empty containers to be returned.
- Vessel schedules are completely off track. There is no certainty when vessels will unload and depart at various ports.
The latest development is that in April and May, some carriers will have blank sailings. This means that these carriers won’t have vessels sailing at all during certain weeks. This is exacerbating an already impossibly tight market. Shippers are literally bidding for an extremely limited supply of space on vessels. The cost of ocean freight has continued to skyrocket during these weeks.
All of this congestion has contributed to a huge backlog of products in Asia ready to ship out with no equipment and vessels to put the goods on. Numerous factories are complaining about running out of space to hold goods that have been produced Without space to store these goods, some factories won’t be able to continue production.
In an effort to get much-needed products, some importers are resorting to air freight, which has led to a massive increase in air freight rates in the past month. Some of the major airports (LAX and ORD) are experiencing huge backlogs at their warehouses as they try to digest the influx of air freight.
The reality is that there is no end in sight to this congestion. Carriers are forecasting congestion for the remainder of the year. In the immediate forecast, we’re expecting the situation to get worse in the next few weeks with the extreme lack of vessel capacity and equipment to ship product out. We’re being told that space is already booked through much of May for whatever limited space there is on ocean vessels.
The global supply chain is essentially grinding down to a halt.