No Relief for Shippers as Congestion and Rates Continue to Build

With demand from shippers remaining at high levels, bottlenecks developing across the supply chains, port infrastructure stretched, and inland transport also near overload levels, there are few signs of relief for shippers in the near term. The latest data from Xeneta taking real-time rates from leading shippers showed a leveling off in August but they continue to forecast that increasing port congestion and relentless demand ahead of the year-end holidays' sales will continue to drive the markets in the weeks ahead.

As an example of just how unrelenting the situation has become and the increasing pressures, the Marine Exchange of Southern California that manages ship movements in the San Pedro Bay reported no less than four new records in the past few days surpassing new highs that had only been set days before.  On August 30 there was a new record of 129 vessels in the port complex with a record 76 containerships at the ports of Los Angeles and Long Beach. 

While Captain Kip Louttit, Executive Director of the Marine Exchange of Southern California, notes that there might be a slight downward trend, the congestion outside the port reached record levels as well. There was a record 75 vessels in the anchorage and drift areas on August 29, surpassing the previous high of 71 on August 27, with the main anchorage and the contingency both full with a further 12 vessels, including eight containerships, drifting beyond the anchorages also waiting for space in the port.

While the backlog in Southern California might be the most dramatic, many ports around the world are also reporting increased volumes and delays. With global demand remaining high for the container carriers, long-term contracted ocean freight rates stand at a remarkable 85.5 percent higher than a year ago according to data from Xeneta.  August, however, showed a modest gain in the rates of just over two percent. 

“In the context of 2021, a 2.2 percent monthly increase in rates appears modest, but in any other year this is an excellent result for carriers,” notes Patrik Berglund, Xeneta CEO. “Remember, this is yet another rise on the back of the largest ever monthly increase in July (28.1 percent). So, while some may have been expecting – read ‘hoping for’ if you’re a cargo owner – an adjustment downwards, we’re seeing a further demonstration of the powerful position liner operators find themselves in. They really are holding all the cards… and winning big.”

The pressures are coming across all the major markets according to Xeneta’s data. In Europe, imports rose by half a percent, while exports climbed more than three percent. Results in the Far East followed a similar pattern, with imports up nearly one percent (up 50.5 percent since August 2020) and exports jumping by 2.5 percent (a massive 115.5 percent year-on-year increase). Xeneta reports similar increases in the U.S., where imports increased by an additional 2.1 percent and exports climbed 0.6 percent month-on-month. 

“While we can’t be certain of a repeat of the astronomical monthly increases the industry has grown accustomed to, further gains are certainly not of the question,” comments Berglund. “There’s still a dearth of equipment, high demand, and, worryingly, very congested ports that are choking up the supply chain for shippers and retailers.”

The Xeneta CEO says landside infrastructure is “simply overwhelmed,” with the congestion tying up vessels, and their sought-after containers, in an ever-worsening cycle of delays.

“With the holiday season logistical rush round the corner things may get worse before they get better,” forecasts Berglund, “and that’ll have an obvious knock-on effect on rates.”