Recently we’ve seen a few indicators that point to the Trans-Pacific trade lane improving. While these may seem like a welcomed sign of relief, several transportation executives caution celebrating just yet.
Why Things Are Looking Up
There are several reasons why many people and even media outlets are claiming the supply chain crisis is starting to ease. One of those reasons is the long-dwelling containers at the Los Angeles and Long Beach ports have recently been reduced by one third, resulting in the ports postponing the escalation of fees for a third time.
Meanwhile, sweeper ships are collecting thousands of empty containers for repositioning to Asia which is freeing up limited chassis. In conjunction with falling rates and big-box retailers claiming they are stocked up and ready for the holiday season, its understandable how many could think the worst is over.
In fact, just last month, Bloomberg published an article titled “The US supply chain crisis is already easing,” accelerating the portrayal of a healthy and stable supply chain. Even if there are encouraging signs right now, including the West Coast rails improving and congestion easing, shippers are advised to take caution and plan ahead according to several logistic experts.
Too Good to Be True
If there’s one thing we’ve learned about the global supply chain in the last two years, it’s how fragile the system is due to outdated processes and technology. Having dealt with capacity constraints, fluctuating rates, port congestions and a slew of other issues affecting the global supply chain, it’s no wonder logistics experts are skeptical of recovery. The COVID-19 pandemic has put the global supply chain on an unpredictable trajectory. Now with various variants in play, including the new Omicron variant, things are more erratic than ever before.
One of the reasons for skepticism is time. While the global supply chain might experience a small window of relief in the first half of 2022, before the onset of the next holiday season, it might not be enough time for it to recover and regroup. We must also acknowledge the possibility of the relief never happening as experts from multiple sources advise to “adapt to the new normal”. There are some who believe that strong consumer demand, together with retailers’ need to replenish their supplies after the holidays, could result in a very busy cycle leading into the Chinese New Year on February 1st, 2022.
This in conjunction with the recent announcement of feeder and barge operators suspending services in the Pearl River Delta in China, would mean a nearly non-existent relief period before the traditionally busier second half of the year.
More Money, More Problems
Consumer spending is another cause for concern regarding believing that the global supply chains health is on the rise. Economists and logistic experts alike believe consumer spending is a key driver in the port congestion issue and is likely to continue into 2022 due to growing US wages and the stock markets nearing record highs. While this could change due to the Omicron variant, economists are confident that the growing wages will support stronger spending going forward. Which if true, would most certainly lead to a continuation of the port congestion problem.
Can’t Trust Carriers
Blank sailings and overall lack of capacity within the global supply chain is another reason to be skeptical of the supply chains recovery. Carrier services are being thrown wildly off schedule with numerous ships waiting in queues or sailings being voided. In a recent report published in late October by Sea-Intelligence Maritime Analysis, it states that 12.5% of the global capacity is unavailable, a figure that is unlikely to change in the coming months.
Currently, shippers welcome and rejoice the reduction of spot rates in the Trans-Pacific trade lane and see it as a sign of things returning to normal but according to experts in the industry, the reduction in prices is more likely due to production interruptions and the end of the peak season, rather than things getting back to normal.
While the Trans-Pacific trade lane might be showing signs of recovery, we should all prepare for further uncertainties ahead. With that being said, it’s important to have a logistics partner in your corner who can help you navigate through the good times and the bad. A partner who looks out for your best interest and anticipates issues before they arise.
At ClearFreight, our slogan is “Customer Forward” because we put our customers first and their needs and best interest are always our priority. Contact our team of experts today to hear how our supply chain solutions can meet your company’s needs. We’d be honored to be your partner and help you make logistics easier for you.