Global Shipping Delays to continue: The Big Picture…

A 2022 MESCR Minute

Happy New Year. I’d love to be able to start the year by reporting good news on the international freight and logistics front. Sadly, that’s not the case — it’s actually going to get worse for Australian importers.

And this will have a multi-faceted knock-on effect on our supply lines.

For example, for supermarkets to continue to stock fresh food and vegetables, farmers need a good supply of farm ‘inputs’ such as fertilisers and farm machinery parts. Disrupted logistic lines reduces availability, which reduces farm output which in turns affects supermarket orders . . .  and eventually, you and me.  Import difficulties affect us all, eventually.

The current global shipping challenge is straightforward: a continued large increase in export trade between China and the US and the EU (largely due to online purchasing by home-bound consumers during COVID) combined with ongoing large-scale port congestion at both ends (mainly due to COVID issues), is resulting in a lack of available ships to service the Southern Hemisphere.

Consider this:

1. Trade levels
   According to Bloomberg, China’s exports are continuing to expand, with exports to the US in December up 21.2% Year-on-Year, to the EU up 25.6% YY and to Australia up 19.9%.
   It’s worth mentioning Australia’s trade increase is partially due to orders of vaccine and COVID testing. About 70% of Australia’s Rapid Antigen Testing units come from China (17 of the approved 21 RATS come from China). Air freight is handling some of it, but shipping demands remain high. Meanwhile . . .
   
   
2. US Port Congestion
   Multiple factors are increasing US port congestion with the situation in mid- January 2022 worse than ever. The Port of Long Beach/Los Angeles reports there are currently 106 vessels lined up offshore compared to 60-70 a few months ago, and transport days across the Pacific are now 113 days compared to 45 days pre-pandemic.
   Congestion onshore is also an issue. Multiple ports in the US and Canada are reporting delays caused by lack of crane manoeuvrability due to onshore container congestion, ongoing labour shortages and severe weather.
   All of this is adding to the congestion, and further delays are expected with the re-positioning of vessels from the Southern Hemisphere to the northern cross-Pacific, cross-Atlantic routes. (Many thanks to industry leader Lars Jensen for the insights. Read more from Lars here)
   
   
3. China Ports, more issues
   An outbreak of Omicron in multiple Chinese ports and manufacturing sites is causing worldwide supply chain concerns. The major port of Ningbo recently suspended some trucking services due to an outbreak resulting in shippers reverting to the ports of Shanghai and Xiamen causing further congestion at these ports. More is expected as Omicron bites deeper. Increased delays and disruption are almost certain.
   
   
4. Lunar New Year
   To make life even more interesting, the annual shutdown/slowdown of Asian countries for Lunar New Year celebrations is only two weeks away: February 1^st to 15^th. The celebration’s two-week labour shutdown across Asia will not help in clearing the congestion: even in the good years, New Year celebrations create global shipping challenges.

All of this means we in Australia can expect to be faced with ongoing shipping challenges and increased freight costs for the foreseeable future. 

And it’s still only week 2 of the New Year. Strap in for an interesting ride.

Want more information?
Contact MESCR GM James Scotland (james.scotland@aigroup.com.au) or get in touch via our LinkedIn here.