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EDITORIAL


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Issue 2 2021 - FBJNA From the Editor


CONTACTS2021 SALES


///NEWS


Freight Business Journal North America - FBJNA reaches out to the decision makers and influencers involved in international freight transport and logistics. FBJNA boasts the most informative and authoritative source of information with unrivalled in depth knowledge of the rapidly changing freight business environment. Our complimentary website www.fbjna. com provides the most up to date news and analysis from within the international shipping industry.


By Karen E. Thuermer


COVID-19 continues to wreak havoc on transport networks around the globe. The problem only re-emphasizes the importance of getting workers vaccinated so they have protection against the virus. The ports of Los Angeles and Long Beach offer a good example. In late January


some 700 dockworkers reportedly contracted COVID-19 and hundreds more took virus-related leave, raising fears of a severe slowdown in the region’s multibillion- dollar logistics economy. Meanwhile, Port of LA Executive Director Gene Seroka reported in mid-February


that some 62 vessels, including 20 containers ships, were anchored awaiting berth space. In the dual crisis, the port has been hit hard by surging imports due to one of the biggest shiſts in consumer spending behavior since the 1970s. Port officials say that container and street dwell times at the port are double the pre-import surge. Vaccines now are being issued at the San Pedro Bay ports. But can there be a better


example as to why vaccinations are needed quickly? Slowing the process has been the patchwork of vaccination eligibility rules and registration procedures made at local levels coupled by the fact vaccine demand far outstrips supply. Organizations including the American Apparel & Footwear Association (AAFA)


have sent letters urging President Biden, states, localities, and California to prioritize port workers as essential workers for vaccinations since port workers are essential to ensure the vital flow of goods through the nation’s ports. “They deliver medical supplies to healthcare workers, food to grocery stores, and


other essential products, like personal protective equipment (PPE), to the American people,” AAFA emphasized. Meanwhile, demand for goods, which began to explode in the second half of 2020


and are expected to continue into 2021. The impact on shipping is unprecedented. Hapag Lloyd CEO Rolf Habben Jansen said during a recent virtual press conference from Germany: “The Covid-19 pandemic has led to the biggest ‘operational crisis’ our industry has seen for many years.” He refers to the situation as the “perfect storm” for shipping. “Terminals in many places are overwhelmed and beyond capacity,” he said. “And


it is unlikely this will be resolved soon. Fixing port delays takes time. We see demand remaining high and (retail) inventories low.” This translates to inefficient operations. And the option of rerouting ships to other


ports to make up for time is out of the question. For one thing, seaports throughout North America are experiencing record volumes and consequential congestion. The situation has been exacerbated by severe winter weather that has resulted in delays and shutdowns at seaports on both coasts. Container terminals at the Port of New York and New Jersey remained closed on Feb. 2 amid a severe winter storm that brought heavy snow and 40-45 mph winds, the port authority said. And consider the extreme weather in Texas that caused the Port of Houston to cease all public terminal operations in mid-February. “Schedule reliability admittedly is at a very low level,” Jansen said. “The delays that


we have at arrival have really gone up.” Hapag-Lloyd has seen average delay on arrival grow from 43 hours in January 2020 to 125 hours as of February 2021. But the problem goes further than weather conditions. Container shortages have


resulted in slower turn times and volatile imbalances at seaports worldwide. “Box utilization dropped like a stone in Third Quarter 2020, then soared to a level


never seen before,” Jansen commented. “Every container box is in use today. And the container leasing market is empty. It has been for a while.” With demand surging, steamship lines now employ their entire fleets not move


shipments and reposition empty containers. Consequently, shipping rates are increasing say nothing of charter rates that are


skyrocketing on the back of increasing demand for ship capacity. Jansen maintains the capacity crunch will get worse before it gets better. But the surge in demand for consumer goods has not only created bottlenecks at


seaport terminals. Bottlenecks also are occurring at inland terminals and within modes of inland transport. Demand has spiked for trucking capacity as grocers and retailers look to restock shelves and communities demand shipments of the highly coveted Covid-19 vaccine. Not surprising, trucking rates have surged.


Air carriers also face issues: soaring cargo demand and capacity issues. In


January, aircraſt were exceptionally full for post-holiday flights. Niall van de Wouw, managing director of CLIVE Data Services, attributes this to heightened consumer spending on high-value products over travel and leisure. “Airlines are having to ‘fly by sight’ as they simply cannot know what is around the


next corner,” he said. “When we read that some carriers are telling customers they cannot guarantee their capacity commitments in January and February, this tells you how full flights are. Capacity is tight and we sense no underlying currents which will swiſtly change this.” Turning to warehousing and distribution, we find that, unlike most other


segments of the economy, business here is booming. Space for current demand is insufficient, and developers cannot build DCs quickly enough to meet needs. CBRE reports that the segment is at record highs. Vacancy rates are at an


unprecedented low 4.7%. “At the end of Q3 2020, more than 312 million square feet was under construction [nationwide] and 37% of this was already preleased -- the highest rate of preleasing in over a year,” said James Breeze, senior director, Global Head of Industrial & Logistics Research, CBRE. Reverse logistics is particularly being stretched. Reverse logistics is space and


labor-intensive. Items must be processed piece by piece. Returns are not palletized. Complicating matters, retailers do not know how much and what products are being returned, which makes it more difficult for retailers to handle returns. It prevents them from adequate planning. CBRE estimates that for the average return, reverse logistics costs amount to 59% of the original sales price of the item. Online order fulfillment itself requires three times more space since all inventory


is stored at the warehouse. Plus, there’s greater product variety, deeper inventory levels and space-intensive parcel shipping operations than non-ecommerce operations. All totaled, the logistics/transport industry is on overload. Many expect that by


Third Quarter 2021, the pace of business will be back to normal as the majority of people are vaccinated and the spread of COVID-19 wanes. But growing confidence will result in a “new normal” with companies continuing to implement new systems and lessons learned from the global pandemic. FBJNA looks forward to exploring those changes and challenges ahead.


If you have any stories or letters which should be of interest or any feedback on FBJNA, please contact our editor Karen Thuermer - karen.thuermer@fbjna.com


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Our next issue will include features on Alaska/Hawaii Trade Markets, Air Cargo - E-Commerce effects and impacts plus Digitalization.


For further details contact: Matt Weidner - T: + 1 610 486 6525 E: matt.weidner@fbjna.com


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