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Imports at LA-LB Ports Fall as Ship Backlog Rises, Cargo Capacity Suffers as White House Suspends Flights Operated by Chinese Airlines, Chinese New Year Is Fast Approaching

By January 27, 2022 No Comments

Ocean  

Pacific International Lines (PIL) placed first newbuild order in seven years. After seeing its earnings recovered in the soaring freight market, Singapore-based carrier PIL has signed an agreement of intent with Jiangnan Shipyard for its first vessel purchases since 2015. Sources at Jiangnan Shipyard, a subsidiary of the state-owned China State Shipbuilding Corporation, revealed that PIL had placed an order for two 13,000 TEU LNG-fueled ships, with options for two more. Each ship will cost roughly $160 million and will be delivered in late 2024.

Global vessel arrival times reach all-time low. According to the newest Sea-Intelligence Maritime Analysis report, global schedule reliability of container ships fell to its lowest recorded level in December driven by another terrible performance on the trans-Pacific, when just one in ten boats arrived on time. Severe port congestion in Asia, the U.S., and North Europe until 2021 has spilled over into the new year, causing boats to be delayed and prompting companies to cancel sailings and skip ports in a frantic attempt to reclaim schedules. In December, global schedule dependability was 32%, the lowest since Sea-Intelligence began tracking the statistic in 2011. The average on-time performance for the whole year 2021 was 35.8%, with an average vessel delay of 6.86%.

Companies gifting shipping workers with benefits, attempting to alleviate labor shortage. According to Drewry, an independent maritime research consultant, container shipping pre-tax profit for 2021 and 2022 might be as high as $300 billion, whereas the industry projection for 2021 was a record-breaking $150 billion. While container shipping businesses have enjoyed a record year, the industry is experiencing a labor shortage created by discontent and underpaid workers. This threatens to destabilize the already shaky global supply chain, putting those record earnings in jeopardy. As a result, the world’s leading shipping companies are seeking to reduce employment shortages by passing on a portion of their pandemic earnings to their employees in the form of substantial one-time bonuses.

Customs

Updates to HTS numbers subject to Section 201 duties go into effect Jan. 27. The changes made to some HTS categories under the HTSUS that are subject to Section 201 solar measures are detailed on pages 184-185 of USITC Publication 5240. The new HTS shall continue duty treatment for measures taken in accordance with Section 201 of the Trade Act of 1974 under the relevant U.S. The following note will go into effect on January 27, 2022.

Ports

North America experiencing the worst port congestion. According to a new performance indicator announced by Kuehne + Nagel (K+N) cumulative container delays at the world’s major ports are presently at 11.6 million TEU “waiting days,” with North America accounting for 80% of global port congestion. K+N stated in a statement that a “typical” level of congestion at the 13 ports monitored by the key performance indicator would be fewer than 1 million TEU waiting days.

Imports drop at Southern California ports as ship backlog grows. Imports are down at the nation’s main container port complex, despite a record-breaking backlog of ships waiting to unload. According to preliminary figures from the ports, combined inbound volume at the ports of Los Angeles and Long Beach declined roughly 14% in December compared to the previous year. It was the fourth consecutive month of year-over-year reductions, even as the backlog of cargo ships off the coast of Southern California grew. According to the Marine Exchange of Southern California, the number of vessels waiting to enter the port complex surpassed 100 in December and reached a record 109 in early January.

Air

Cargo capacity suffers as U.S. suspends flights operated by Chinese airlines. The suspension of more than three dozen passenger flights operated by Chinese passenger airlines by the U.S. government in retaliation for China’s COVID policies restricting U.S. carrier operations will also remove widebody belly capacity for cargo, further stressing supply chains already under strain to meet international trade demand. In response to China’s use of so-called “circuit breaker” penalties, which automatically trigger inbound flight restrictions when a certain number of arriving passengers test positive for COVID up to seven days after arrival, the Biden administration suspended 44 flights from the U.S. beginning Jan. 30 and continuing through the end of March. In recent weeks, Chinese measures have prompted American Airlines, Delta Air Lines, and United Airlines to cancel flights.

Boeing 747-8 freighters and all 777 widebody aircraft prohibited from landing at airports with 5G towers under FAA regulations. A new FAA rule preventing Boeing 747-8 freighters and all 777 widebody aircraft from landing at airports where 5G towers might interfere with onboard safety equipment could have a disproportionate impact on large cargo carriers such as UPS, FedEx, and Atlas Air. The FAA discovered an additional hazard from interference with radio altimeters in addition to causing a landing risk in low-visibility situations, according to the airworthiness directive published Tuesday. Other systems may potentially be jeopardized.

World’s largest container line shows interest in Italian airline​​. Mediterranean Shipping Co. (MSC) is seeking a controlling stake in the new Italian flag carrier ITA Airways through a deal that would also include Deutsche Lufthansa AG. The transaction would be worth between 1.2 billion euros ($1.4 billion) and 1.5 billion euros. MSC announced on Jan. 24 that it has submitted an expression of interest to ITA’s Italian government owner outlining the concept. Separately, Lufthansa stated that it will function as an industrial partner and will consider equity participation. 

Yamoto and JAL to partner on domestic cargo flights. In response to new truck driver rules, Japan-based logistics business Yamoto has partnered with Japan Airlines (JAL) to introduce domestic cargo flights in 2024. In order to “create a sustainable and robust logistics network for long-distance cargo,” the two corporations will begin flights between Tokyo and Hokkaido, Kyushu, and Okinawa in April 2024. Three 28-tonne capacity A321 modified freighters flown by JAL’s low-cost affiliate, Jetstar Japan, will operate the routes.

Boeing reports loss as 787 costs climb. Boeing Co. said manufacturing issues and delivery delays with its 787 Dreamliner airplane will cost it another $4.5 billion as the planemaker announced its third annual loss in a row. The firm stated that it intends to deliver more 737 MAX and Dreamliner planes this year and to resolve the manufacturing issues that have stalled its operations. While it incurred charges in all three of its business groups last quarter, it also stopped losing cash for the first time in more than two years.

Trucking

Diesel reaches its peak price since 2014. According to Energy Information Administration (EIA) data issued Jan. 24, the national average price of a gallon of diesel reached its highest level in more than seven years, climbing 5.5 cents to $3.78. A gallon of fuel has cost the highest since September 15, 2014, when it reached $3.801. Over the last three weeks, the price of diesel has risen by 16.7 cents. A gallon of fuel now costs $1.064 more than it did in 2021 at this time. The EIA’s weekly survey found improvements in all ten areas, with the greatest being 7.9 cents in New England and the smallest being 2 cents in the Rocky Mountain region.

Paccar lays the groundwork for pure electric truck platform. Paccar is in the early phases of developing a new Class 8 electric truck platform that will be free of the restrictions of a diesel powerplant and a sophisticated exhaust system. The platform would be in addition to what the Bellevue, Wash.-based business employs for its workhorse Kenworth T680, which is available in diesel, electric, and hydrogen fuel cell models. Customers should not expect to see the new platform until late this decade or maybe 2030, as the firm is only getting started.

Truckers outraged by vaccine mandates roll towards Canada’s capital in protest. Truckers upset by vaccine restrictions descend on Canada’s capital in protest. Several convoys carrying hundreds of vehicles set off as part of the Freedom Convoy over the weekend, while local protests have already delayed traffic at certain border crossings. According to organizers, thousands of drivers have signed on, as well as allies from outside the industry.

Rail

Canadian National Railway (CNR) appoints new CEO, avoiding proxy battle. CNR chose a new CEO and made changes to its board of directors, a move that will allow the railroad operator to avoid a proxy struggle. Tracy Robinson, a long-time railroad official, has been named CEO and president of the Canadian railroad operator. TCI Fund Management Ltd., located in the U.K., has decided to suspend its proxy fight at Canadian National, which has appointed a new independent director and aims to nominate two new independent directors with North American railroad expertise by its annual meeting.

Labor and railways clash in contract negotiations, seek mediation. Ten rail unions have declared an impasse with U.S. freight railways over negotiations for a new labor deal and have requested the National Mediation Board (NMB) for a government mediator to assist with negotiations — a step supported by the railroads. After more than two years of negotiating, the Coordinated Bargaining Coalition (CBC), comprised of unions, stated that discussions had come to a halt. Because of the impasse, the coalition is seeking a mediator in accordance with the Railway Labor Act. The unions said that the National Carriers’ Conference Committee (NCCC), the group representing the labor interests of U.S.-based Class I rail operations in the discussions, is not bargaining “in good faith,” resulting in a “dead end” in negotiations.

Court awards BNSF Railway temporary restraining order, preventing unions from striking. A U.S. district court judge in Fort Worth granted BNSF a temporary restraining order, preventing two of its unions from striking. According to District Court Judge Mark Pittman, his ruling does not resolve whether the disagreement between the railway and its unions is a “major” or “minor” one under the legislation. A decision on that distinction would have affected whether or not a prospective strike was permissible. 

Amy Miles named non-executive chairwoman of Norfolk Southern Corp. (NSC). Amy Miles was named non-executive chairperson of NSC, effective May 1. Ms. Miles, an Atlanta freight railroad board member since 2014, follows James Squires, who announced last month that he would step down as chairman and CEO on that day.

Other

Is your company prepared for Chinese New Year supply chain disruption? Chinese New Year (CNY), also known as Lunar New Year or Spring Festival, is on Feb. 1st, and is one of the most important Chinese holidays, resulting in the world’s largest annual mass migration. As a result, CNY is a fierce disruptor of Chinese and global supply chains, with a four-week production halt for Chinese-based suppliers, contract manufacturers, and partners. Almost everything closes down during this time, including the government and industry, while ports and customs normally function with a small crew, focusing on perishable and priority items.

However, preparation for this year’s Chinese New Year may be more difficult than normal. It is accompanied by the Winter Olympic Games in Beijing (which begin on February 3rd) and the well-publicized lack of shipping space and container availability. As a result, it is projected that exports from China would be few or limited in the first few months of the year.

Contact our experts if you have any questions about how your supply chain may be impacted during this time, if you need assistance managing your logistics, or if you wish to tap into Navegate’s network of carriers and agents.

Though it is generally too late to avoid possible Lunar New Year delays, Navegate can assist you in enabling a resilient supply chain and minimizing overall disruptions. 

No relief for China’s strained supply chains. Covid lockdowns, quarantines, and restrictions are producing a backlog in some of China’s main ports, resulting in “chaos” and raising air freight rates by up to 50% in some cases, according to experts. Air freight costs have risen ahead of China’s extended Lunar New Year holiday, and several shipping companies have ceased operations, placing the emphasis back on overburdened supply networks. Lockdowns and other restrictions have been imposed in the main port cities of Shenzhen, Tianjin, and Ningbo, as well as the industrial center of Xi’an due to the recent spike in COVID cases. Infections have been recorded in other places as well, including Dalian and Anyang.

Occupational Safety and Health Administration (OSHA) formally withdraws its mandate for COVID-19 vaccine. OSHA said on Jan. 25 that it is formally dropping its emergency interim regulation mandating major employers to require their employees to obtain COVID-19 immunizations. The withdrawal follows a U.S. Supreme Court decision on Jan. 13 that stayed the standard, stating that opponents to the rule, including American Trucking Associations, were likely to succeed on their claims. The Supreme Court decided 6-3 to overturn the interim requirement, holding that OSHA lacked the power to enforce the mandate.

U.S. trade deficit in goods will exceed $1 trillion in 2021. For the first time, the U.S.’ trade deficit in goods surpassed $1 trillion in 2021, as an economic rebound enabled Americans to purchase a record number of imports such as toys, cell phones, and appliances. The goods trade deficit increased to $1.08 trillion in 2021, up from $893.5 billion the previous year. According to an advanced government estimate, the goods deficit grew by 3% in December to $101 billion from $98 billion. It was the highest monthly increase ever recorded. The rapid recovery of the United States’ economy in comparison to most other nations, backed by large government stimulus, helps to explain the record trade deficit.

Nationwide grocery store shortages have returned. A labor crisis worsened by the omicron surge has resulted in empty food cases and rotten food across the country. People are reporting bare shelves and coolers at supermarkets, which might feel like a replay of spring 2020. According to experts and food corporations, there is enough food in the nation, but a variety of obstacles throughout the supply chain appear to be preventing it from reaching consumers. What’s new is a labor shortage that began with the Great Resignation and has increased with the omicron surge, which has been exacerbated by short-term interruptions in particular industries and locations due to harsh weather and product recalls.

Supply chain issues might cost apparel and footwear industries $17B. According to a new analysis released by Kearney, ongoing supply chain difficulties may cost North American clothing and footwear businesses between $9 billion and $17 billion in lost EBITDA in 2022. That is a conservative estimate calculated by the report’s authors prior to the emergence of omicron, implying that the lost revenues may be substantially higher.

U.S. product returns increased to 16.6% of overall retail sales. Consumers are sending heaps of product returns back to U.S. retailers following the winter peak shopping season, with inbound products totaling 16.6% of the overall U.S. retail sales, a significant rise from the 10.6% returned in 2020, according to the National Retail Federation (NRF). The percentage of returns for e-commerce transactions was much higher, at 20.8%, although this figure did not grow over previous years’ data, according to the NRF. According to a poll issued today by NRF and Appriss Retail, the categories with the highest return rates were comparable to 2020 metrics: auto parts (19.4%), clothes (12.2%), and home improvement and housewares (12.2 %) (tied at 11.5% each).