Congestion woes were theme of January, as a heavy surge of import containers landed on the West Coast prior to the New Year, and the record-high volumes of freight began to move inland, overwhelming marine and rail terminals across the US.
While January was fraught with delays and frustrations for shippers, truckers, and terminal operators alike, the flow of cargo should return to normal levels once the pre-tariff surge is absorbed by the system and some relief is expected as Chinese factories cease production during the Lunar New Year in February.
International Trade News
Trade wars, holidays, and chassis shortages have combined to create a "perfect storm" of terminal congestion in the ports of Los Angeles and Long Beach. Terminal operators are struggling to dig out of the backlog, with the hope of it clearing in coming weeks. In this article, we look at 5 major factors contributing to the current congestion on the West Coast.
A surge of import cargo spurred by tariff hikes, peak season, and the Chinese Lunar New Year is causing heavy congestion at the ports of Los Angeles and Long Beach, as well as the Port of New York and New Jersey (PANYNJ). The increased volume is causing a chassis shortage which is resulting in long pick up times and delays. These delays are not only impacting local cargo but also movements to the rail. Relief is expected in February, when volumes dip after Lunar New Year. Check out this article from American Shipper for more information.
Washington officials are considering the idea of lifting tariffs on China to accelerate reaching a resolution in the ongoing trade dispute between the two nations. News of the potential tariff removal caused U.S. stock benchmarks to rise to their highest levels of the session, reported MarketWatch.
Disputes between the US, UK, and EU have left some shippers concerned about the future of trade between the countries. However, capacity for the trans-Atlantic is staying pretty stable, though slightly tighter than last year. MDS Transmodal reported that on the westbound trans-Atlantic, demand is around 1.25 million TEU whereas capacity is at just over 1.4 million TEU. For eastbound, demand is around 0.84 million TEU with 1.05 million TEU capacity.
With the UK slated to leave the EU in March, the European Commision has started to implement preparations in case the UK leaves without a plan. It warned that transport of goods may be delayed due to needing new checks on UK livestock exports. Customs duties and taxes will also need to be applied on goods moving between the UK and EU. Air transport links may be affected, but flights will be allowed for 12 months. Lastly, carriers will be allowed to transport freight by road for 9 months without needing to apply for a permit.
Regulatory & Compliance Updates
China released an announcement at the end of December, stating that as of January 1, 2019, it will be reducing or removing some import and export tariffs on 706 HTS items. The reductions were made in an effort to open up China's economy as it negotiates a trade deal with the U.S. and to lower costs for domestic consumers.
While most of us were lounging around in our pajamas, opening gifts, and spending some quality time with our families this holiday season, two important announcements were released about Section 301 product exclusions at the end of December that could impact your imports. We'll go over them and tell you what you need to know, so keep on reading.
Around the World: Current Events
"If President Bolsonaro is successful in his efforts to boost economic growth, exports to Brazil from the United States should rise as domestic consumers earn more disposable income. Similarly, exports to the United States from Brazil should rise as deregulation allows for harvesting of natural resources. These potential changes will be seen in both the total capacity and average capacity for fully cellular vessel services on this trade lane," reports American Shipper.
The UK is leaving the EU on March 29, but has yet to reach a trade deal for the port of Dover. According to JOC.com, the additional customs checks required if the UK drops out of the EU Customs Union "will dramatically reduce capacity at the Calais-Dover trade corridor, impacting 75 percent of all roll-on, roll-off (ro-ro) freight from Europe that passes through the Dover Straits, or more than 4 million accompanied trucking units, i.e., truck, trailer, and driver."
The slowdown from the Chinese Lunar New Year should bring some much needed relief to LA/LB and PANYNJ as they battle to dig out of the backlog and overcome the congestion in the aftermath of this whirlwind holiday season.
Domestic Shipping & Logistics News
The import container surge causing congestion in the ports of Los Angeles & Long beach and PANYNJ has spread inland, causing delays at rail terminals in Joliet, IL and Memphis, TN. According to Union Pacific, “There is significant chassis tightness in several key markets as the heavy surge of imports that landed on the US West Coast prior to the New Year continues to flow to the inland terminals. There is still considerable import freight at the west coast ports, so we expect heavy volumes to continue at the inland terminals for several weeks.”
"With diesel falling from $3.35 a gallon at the end of October to just under $3.00 now, the breakeven point on the OTR-to-intermodal tradeoff has gone from under 650 miles to over 700 miles," DAT Solutions explains in this article.
The Port of Los Angeles moved more cargo in 2018 than any time in its 111-year history, racking up 9,458,749 TEUs. It is the third consecutive year of record volumes and the most cargo moved annually by a Western Hemisphere port, the port authority reported
DAT Solutions ranked the Top 10 markets for outbound dry van, refrigerated van and flatbed freight from 2018. Atlanta, GA took the #1 spot for both dry van and reefer, and Houston, TX took #1 for flatbed. We were happy to see Cleveland, OH make the list twice, coming in at #3 for flatbed and #9 for dry van.
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