Trans-Pacific faces challenges impacting supply chains

Florham Park, NJ)…Your supply chain well-being is our top priority. With this advisory, Hamburg Süd aims to provide you as our valued customer with the most relevant and up to date information to help you navigate this period of heightened volatility.

Key Notes:

  • US Imports from Asia in April increased by 29.3% on a year over year basis to 1.55 million TEU, according to IHS Markit. While this does represent a 6.6% decline over March 2021 in volume, the decline should not be attributed to a softening in demand but rather due to continued capacity disruptions caused by heavy congestion across the entire Transpacific network.
  • Slide or missed sailings continue to be a theme across the industry as congestion takes its grip and vessels are faced with extreme delays across many North American ports. At Hamburg Süd on a year to date basis this has resulted in a 20% capacity loss into the West Coast and a 4% capacity loss into the East Coast. This unfortunately means Hamburg Süd may not be able to fully honor its original allocations for all customers.
  • Ports of Los Angeles and Long Beach remain strained with vessel wait times averaging between 1-2 weeks with around 20-25 vessels at anchorage at any given time. Labor shortage remains the primary constraint with large vessels being limited to 4 gangs which as a result is extending port stays by 3-4 days. The situation is even more dire at the Port of Oakland where wait times now extend up to 3 weeks with labor limited to only 2 gangs per vessel on most shifts.
  • Yard Utilization at the Port of Seattle remains at full capacity (120%) due to high volume and labor shortages. Vessel wait time has extended up into the 4-5-day range as container discharge from vessels continue to be metered to ensure it does not outpace container out-gate levels.
  • Peak Season is expected to start early this year as retailers prepare for a strong back to school season that will likely blend into the end of year holiday peak season that typically starts around August. This will unfortunately put more pressure on an already stretched network with the potential to cause further disruptions.

Trending Themes:

Vessel Schedule Disruptions Expected to Continue

In 2021 carriers have missed (slide) a total of 121 sailings into the West Coast and 21 into the East Coast. As demand remains at an all-time high and backlogs in Asia continue to expand, the most common question remains why? The answer is directly tied to congestion levels across the entire network. One well documented and most clearly visible factor are the port delays which on average stands anywhere between 1-3 weeks across the West Coast. With each vessel making multiple stops, this naturally prevents them from being able to return to Asia to meet their next rotational departure. The outcome is an increase in what is described as a slide sailing. This occurs when all vessels on a string are in principle late due to the many delays, and as a measure to resolve the situation, one or more planned sailings will have to be removed to realign the schedules. This has an adverse effect of not only increasing the backlog and by proxy reducing customer allocations but equally in increasing the strain on equipment availability and port yard capacity. It cannot be stressed enough how crucial schedule integrity is to our network recovery.

To put things in context, following is a breakdown of the impact on the Hamburg Süd network due to these delays and as outlined in the schedule table below.

US West Coast

27 missed sailings YTD

20% capacity reduction YTD

Estimated capacity lost now through end Q2 – 16%

Estimated capacity lost now through Aug – 13%

US East Coast

5 missed sailings YTD

4% capacity reduction YTD

Estimated capacity lost through end Q2 – 2%

Estimated capacity lost through Aug – 1%

As a direct result of these continued network disruptions, below is our latest updated sailing schedule for the coming months. Note sailings labeled ‘at risk’ may be subject to a slide should port delays persist and we are unable to secure an extra loader in its place.

Ports, Chassis and Equipment Flow Remains Under Pressure

The combination of high demand and disrupted capacity flow has plagued the industry now for the better part of 10 months. As we look forward in preparation for the back to school rush followed by the holiday peak season, this narrative appears set to continue. Forecast now has May imports projected up 45% YoY with June expected to come in north of 30% YoY. This will provide little relief in clearing the backlogs that extend from factory floors in Asia right through to warehouses across North America. One key to the recovery is in solving the many labor challenges brought on by the pandemic, across the West Coast ports. Another is in the planned introduction of additional cranes in the Ports of Vancouver and Prince Rupert to meet elevated demand.

Solutions however must extend beyond that, with yard utilization at or near capacity, equal attention must be given to rail capacity, truck power and chassis availability. There are many shared dependencies across the network with new bottlenecks appearing on a regular basis. Meanwhile empty container pools in locations such as Los Angeles, Houston, Charleston, Freeport, Savannah, and Newark also continues to grow as we grapple with shortages across Asia. This can once again be attributed to slide sailings and vessel bunching at ports that are restricting our ability to turn containers around in an efficient manner. At this juncture, what’s required is a delicate balancing act between the in-fleeting of new equipment, the repositioning of existing equipment and the close management of available yard space if we are to avoid a complete gridlock across the network.

What are we doing to mitigate?

While the vessel charter market remains extremely tight, Hamburg Süd, as part of the Maersk Group, continues to work on adding capacity in the form of extra loaders where possible to mitigate some of the forced slide sailings. In May we are pleased to announce that we have been able to secure two additional extra loaders, one into the West Coast to cover a gap on the TP6 / UPAS 3 and another into the East Coast for the TP12 / ASUS 2. We are also formally launching our new TP23 / ASUS 8 service into the East Coast which will add capacity to the trade and improve our service on the South East Asia to South Atlantic trade. Furthermore, we are planning to once again in-fleet additional equipment into key geographies in Asia and are in the final stages of our preparation to open a new transload facility in Vancouver which will provide our customers with additional options in the Pacific North West.

While we are avidly pursuing solutions to improve the current conditions, the above challenges for now cannot be completely mitigated. As such, we will continue to update you on further impacts and any potential relief in the coming months.

We value your business and welcome your feedback. Please contact your Hamburg Süd representative with any questions that you may have.