Is the “Finish Line” in Sight?

Welcome back! 2022 arrived fiercely, without surprise… Market demand surged ahead of Chinese New Year, sailings went fully booked, vessels were cancelled held in congested ports, many of the shippers in Asia were unable to provide trucking arrangements to fulfill container slots they had secured. Enter February; a bit of reprieve from the never-ending frustrations plaguing global supply chains the better part of the past two years.

So, as we look to the New Year, the question that is on everyone’s mind seems to be identical… are we done yet? The answer is no simple yay or nay, we have to consider all market conditions and form an opinion as to what will self-correct, and what will not.

We have expectations of softer space and equipment situation for February, steamship lines have used the holiday to reset many of their services, sending vessels back to their proper places in their existing service loops. Shanghai, Shenzhen, Hong Kong have seen a number of blank sailings as of late, a display of the carriers to ‘right the ships’ so to speak. Meanwhile, many factories will not resume production until February 15th, and this leaves a very narrow gap for a bit of softness to come through. It will be the first period of slack we have seen in well over a year and carrier actions will be closely watched.

In Asia, equipment shortages continue to move back towards normalcy. The situation is largely improved and most POL throughout Asia have sufficient equipment on hand at this point. In the US, all eyes are on the terminals and rail operators. Omicron infections are currently attributed to a 25% shortage of staff. Ideally, the latest variant of the virus that created this disaster will pass quickly and terminals will return to normal labor very soon.

Price is of course the largest concern. Presently, signals seem mixed. While many large carriers have extended January rates through February 15, there is still plenty of room for speculation. MSC, YML both confirmed rate extensions through February, however CMA and some others have signaled planned increases on FAK rates. It is not uncommon to see last minute changes on pricing, but the primary expectation has been that January would have marked the highest point in FAK rates and increases would not be further pushed. Only time will tell.

What the next 12-18 months look like, we just don’t know yet. A fair assessment would be a slow, controlled movement towards a stable global supply chain. This doesn’t mean prices at historic levels, but hopefully we can expect more widely available vessel space, container equipment, and more reasonable costs for transport. It is also safe to assume we will see a somewhat unpredictable market with a series of stability and instability coming in waves. Importers have lots of product still held in Asia, as it comes to the market in surges, we could see peaks and valleys frequently for the duration of 2022.

As always, Chain Logic will be monitoring and targeting best practices, and providing our clients with as many tools as we possibly can.