It’s Nonstop Peak Season for Supply Chains

A record number of cargo container ships wait to unload at the ports of Los Angeles and Long Beach near Long Beach, Calif., September 22, 2021. (Mike Blake/Reuters)

Ordinarily, peak shipping season starts around the middle of August and goes through December. January is a lull because U.S. consumer spending declines every year after the holiday season, and February is a lull because many workers in Asia have time off for the lunar new year, which reduces exports.

Businesses depend on that cycle. They hire extra seasonal workers in peak season and regroup in off-peak season. They reevaluate their practices in spring in preparation for the next peak season to start in late summer. That’s how improvements are supposed to be made.

The post-peak lull would be the time to catch up on backlogs and remove inefficiencies. Unfortunately, it doesn’t look like businesses will be able to do that this year as they normally would.

FreightWaves analysis of ocean-shipment data shows that the lunar new year celebrations in Asia will not have much of an effect on imports this year. Zach Strickland, a FreightWaves market analyst, finds that “shippers have ordered approximately 13% more TEUs [20-foot equivalent units] than the same time last year and nearly 80% higher than January 2020 heading into a traditional slow point in import activity.”

In other words, supply chains can’t catch a break. It’s nonstop peak season.

Strickland writes:

Looking at the number of shipments clearing customs, there is traditionally a lull in activity about four to six weeks after the start of CNY [Chinese New Year]. Last year it peaked at this time, leading to a huge unseasonal boom of domestic freight transportation demand in March.

According to various reports, including one from Deutsche Bank using mobility data to track population movements, there is little evidence to suggest that CNY will have a significant impact on production this year as well. The reports cite governmental and societal influences surrounding COVID that is reducing the amount of vacation and travel that normally occurs at this time.

That means businesses will essentially go two whole years without a lull in imports. That’s two whole years of operating with extended hours and maximum capacity and still not being able to clear the backlog of shipments.

If businesses were going to catch up, they would have started chipping away in January and would be continuing to chip away over the next two months. But we don’t see that happening. Both the number of ships waiting for berths at Los Angeles/Long Beach and transpacific shipping times remain near all-time highs. The Wall Street Journal says congestion is spreading to other ports as well, leaving shippers with few low-congestion alternatives.

Again, that’s during what’s usually the off-peak season. Once the normal peak season starts again, it will be even harder to clear congestion. Supply chains are still in uncharted territory; nobody currently working in the industry has experienced market conditions like these before. It’s impossible to say when relief will come, but it doesn’t seem to be coming this year.

Dominic Pino is a William F. Buckley Fellow in Political Journalism at National Review Institute.

Source

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