Logistics News in February 2022

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Hello, it’s IINO.

In this video, I bring you the logistics news for February 2022.

As you know, global supply chain is currently undergoing major disruptions.

Until now, there was a belief that there would be some kind of change after the Chinese New Year. However, what did the market actually do?

This time, I would like to report on the container and space shortages in February mainly in China and North America in chronological order.

So, let’s get started!

During Chinese New Year, Ports of North American West Coast, Not Expected to Recover

This is the news before Chinese New Year.

Normally, cargo volumes generally drop after Chinese New Year. However, with North American retailers’ inventories at record lows cargo declines from China tend to be small.

Container companies and analysts said the slowdown in shipping during the roughly two-week Chinese New Year will be less pronounced this year.

The Chinese government was putting pressure on factories to prevent workers from returning to their hometowns during the vacations in response to Corona.

Also, retail orders reportedly remain strong.

In addition to that, there is a labor shortage in the field at West Coast of North America. They are facing shortage of labor in warehouses, driver and chassis due to the Omicron Variant.

ONE Launches an Additional Ship for the Japan-North America West Coast

Ocean Network Express, ONE, launched another special vessel on the Japan to North America West Coast route in late February.

The normal Transit Time between Japan and the West Coast of North America is 35 days.

However, due to port congestion, it is now 70 days double the normal time and there have been many cancellations since the latter half of last year.

Since January of this year, service to North America has been virtually bi-weekly. The worsening of the situation has been unstoppable and there have been a number of cancellations here and there for the past two weeks.

Temporary Vessels by ONE

The temporary vessel to be deployed by ONE will be 2,500 TEU vessel with the following planned destinations.

Landing port: Los Angeles and Oakland
Loading port: Kobe, Nagoya and Tokyo

They plan to load only cargo originating from Japan.

Port Congestion at East Coast of North America Worsens

The number of container ships offshore at the Port of Charleston increased to 30 in February from 19 in January.

The Port of Charleston, South Carolina is the southernmost port on the East Coast of North America and the fourth largest port on the East Coast for container imports.

It indicates that the supply chain congestion is not limited to the West Coast of North America but extends to many other ports.

The Port of Charleston’s backlog began around Thanksgiving last year and has continued since the Black Friday sales, the day after the fourth Thursday in November.

This was due to an attempt to divert cargo from congested West Coast ports to other ports. The volume of imported containers handled at this port is also increasing up 25.4 percent from the previous year.

Ocean Freight Rates to the West Coast of North America Hit New Highs.

As of February 18, container freight rates from Shanghai to the West Coast of North America reached a record high of USD8,117 per 40-foot container for the second consecutive week.

Rates generally drop after the Chinese New Year. However, rates to LA and LB ports on the west coast of North America are still rising.

Other Shipping Routes

On the other hand, rates on other shipping routes are on an overall downward trend.

To the East Coast of North America are USD18,770 per 40′(40 feet container), down USD152 from the previous week.

To Northern Europe were USD7,652 per 20’ (20 feet container), down USD25 and to the Mediterranean were USD7,416, down USD19.

The number of container ships waiting at California ports has dropped to 76 vessels from a peak of 109 on Jan. 9, but remains high.

Ship Fuel Prices Approach Highest Level, due to the Situation in Russia and Ukraine

The price of marine fuel oil has been rising sharply.

The price of VLSFO, Very Low Sulfur Fuel Oil, in the Singapore market on Feb. 14 hit USD752 per ton up USD20 from the previous day. This is approaching the all-time high recorded two years ago.

Uncertainty over energy supply and demand due to tensions in Ukraine is pushing up oil prices.

The price of low-sulfur fuel oil in Singapore has already increased by over USD130 compared to the beginning of this year.

It is approaching the all-time high of the high dollars 750s which was recorded just after the start of SOx regulation in January 2020.

There is the current sharp rise in ocean freight rates due to the shortage of mainline space. In addition to it, this surge in fuel prices is likely to place an even greater burden on shippers.

Ukraine Closes Odessa Port. Container Shipping Companies Stopped All Shipments to Ukraine

The problems in the Russia-Ukraine situation have begun to cause major disruptions in the global supply chain including container shipping.

Russia began to invade Ukraine.

Ukrainian authorities closed the port of Odessa the country’s largest container port on the Black Sea on February 24 local time.

European shipping companies such as Maersk, MSC, CMA-CGM, etc. have stopped accepting cargoes to and from Ukraine since February 24.

In response, container shipping companies that operate feeder ships in the Black Sea have all suspended their contracts with the country.

As a result, there is now a possibility that containers will be held up at connecting ports in the Middle East and elsewhere.

Service from/to Russia

On the other hand, as for services to and from Russia, all of the aforementioned companies have stated that services are available as usual at this time.

However, depending on the sanctions imposed on Russia by western countries, the trend of services to Russia is likely to become more uncertain.

Commentary Section

Here is the commentary section for February’s news. This time, I focused on only two major news items.

Supply Chain During Chinese New Year

First, it’s about the supply chain, during Chinese New Year.

Usually before the Chinese New Year, container shipping space is tight. And then, it settles down and freight rates tend to drop.

Perhaps in anticipation of the usual trend, it was hoped that the current supply chain disruptions would change in some way after Chinese New Year.

However, while the container backlog on the West Coast of North America has decreased from a peak of 109 vessels to 76 vessels, it is still a high level.

The normal round-trip voyage between Japan and the ports of LA and LB is 35 days. However, since so many ships waiting to be loaded and unloaded, now it takes twice as long 70 days.

Increase Offshore Waiting in Charleston Port

And not only on the West Coast of North America, but also in the port of Charleston on the East Coast, there was an increase in the number of offshore vessels.

This is due to the fact that vessels are being directed to other ports to avoid stagnation on the West Coast. I think the key is to solve the bottleneck on the West Coast.

Soaring Ocean Freigh

Furthermore, ocean freight rates to the West Coast of North America are still rising.

I had a feeling that the ceiling of the price had been reached by remaining high since the beginning of the year. But now it has exceeded USD8,000 and is at an all-time high.

Situation of Russia/Ukraine

Then, as if to drive home the point, the situation in Russia and Ukraine has caused fuel costs to soar.

I will refrain from mentioning the war.

However, the price difference between low-sulfur A fuel oil used for ship fuel and C fuel oil which is subject to exhaust gas regulations is now USD210 per ton.

This will benefit vessels equipped with scrubbers, exhaust gas cleaning equipment, for use of C fuel oil. Thus, to avoid country risk in the future, investment in scrubbers may also proceed instead of using Fuel Oil A.

As of last March, there was the closure of the Suez Canal.

I don’t know how long this Russia and Ukraine situation will last, but it is the same timing as last year.

Strike on the West Coast of North America

And this year, there will be a strike on the West Coast of North America in July.

I personally believe that it will be difficult to resolve the supply chain disruption this year. Therefore, I think it is necessary for shippers to do what they can do now such as “hold inventory”.

Summary

How was the news this time?

I tried to convey the “now” happening in international logistics in an easy-to-understand manner, so I hope you found it useful for your work and other purposes.

If you enjoyed this video, please subscribe to my channel, follow me and share social media!

That’s all for this time. Thank you!

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