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Backlogs, High Rates to Persist as US Imports Grow

Over the last year in the wake of the COVID-19 outbreak, shippers have experienced problems in seemingly every step of their supply chains. Container shortages, vessel space shortages, driver shortages, port shutdowns, the Suez Canal blockage-- the list goes on with each problem adding another stumbling block in the Trans Pacific trade market. Today, market analysts are predicting the current environment to persist through the end of 2021, if not longer. And May 2021 is expected to be the worst month for the industry yet.

"If I was forced to give a guesstimate [on when trans-Pacific spot rates would moderate], I would say the beginning of Q4, or during Q4, but I'm really just guessing," one industry expert was quoted as saying. That is in part because trans-Pacific import volumes are still rising. In January, trans-Pacific imports were up 10% as compared to 2019 levels (2020 comparisons are skewed by COVID), then 13.5% in February, then 51% in March.

Throughout 2020 container rates saw huge increases as steamship lines, ports, truckers and importers all struggled to adapt to a wave of new challenges and faltering production levels. That marks a notable difference in analyst positions today, where continued strong import volumes are responsible for shipper woes.

Two major factors are expected to prop up high rates & low space for the foreseeable future: backlogs in Asia, and import volumes for restocking retail inventories. Industry analysts see a growing problem of export backlogs in Asia building day by day. Because some shippers must wait in line for vessel space behind these backlogs, some importers will see almost a complete halt in their supply chains until carriers slowly work through the volumes. Even as ports make progress with those containers, seasonal shipping will continue to add new waves of bookings; seasons for back-to-school goods, holiday goods, and Chinese New Year 2022 each lead one right into the next. Additionally, US import growth is far above retail sales growth, indicating retailers are currently restocking inventories. One expert believes that the disconnect is a sign that high rates will be around even longer: "Let's say US consumer demand slows down in Q3 and Q4. That's not expected, but even if it does, capacity availability and rates shouldn't improve quickly simply because of the huge restocking demand."

With vessel fleets at full or near-full deployment, and new container production levels at their maximum capacity, US importers can expect sustained high rates and space shortages until consumer demand for foreign products finally begins to subside.

OTS will continue to monitor this situation as it develops. If you have any questions, please reach out to your OTS Sales representative.