By Michael D. White, author and freelance writer
It’s said that any chain is no stronger than its weakest link with this past year proving that that ages-old bromide has never been truer.
It is critical here to understand that, in reality, there is no such thing as a single supply chain. While the ‘land, sea, air’ elements form an essential core, there are hundreds of thousands of individual chains wound around that central mainstay, each of which is especially crafted to meet the requirements of an infinite number of businesses.
A manufacturer of precision instruments in Indiana, for example, has different logistical needs than a sports apparel retailer in Florida, while the requirements of an importer of auto sound equipment differ greatly from those of an exporter of organic food products. All rely on the same trinity of modes to move their cargo, yet all have markedly individualized needs.
Whatever the situation, whatever the expectations, over the past 12 months, unprecedented congestion at the nation’s major ports—particularly those on the U.S. West Coast—melded with jammed terminals, shortages of critical rail equipment, labor tension, a truck driver shortage, record fuel prices, inflation, and markedly reduced consumer demand to create a seemingly endless Tylenol moment for retailers, manufacturers, wholesalers, importers and exporters, and, ultimately, consumers across the country.
By early December, the state of affairs had regained some small degree of stability with its short, medium- and long-term effects still being sorted—a process that will, in all likelihood, take months, if not years, to sort out.
A major factor that continues to exasperate is the mix of ongoing and complex political, social, and economic problems in China, the nation’s top source for imported goods that accounts for some 22.3 percent of total U.S. imports, according to the U.S. Census Bureau.
The latest figures, however, show that Chinese exports fell at the steepest pace in more than two years in November, 2022—down 8.7 percent year-over-year last month, the biggest dip since February 2020, immediately before a nationwide COVID-induced lockdown brought the country’s economic activities to a screeching halt.
Almost three years on, the situation is seen by many as the latest sign that three years of draconian pandemic restrictions and a steep decline in the global demand for its products have seriously damaged China’s once white-hot economy.
The latest round of strict isolation policies in China to combat COVID is limiting factory production with analysts concerned that the country’s export flows will be hindered into 2023 unless the government there backs away from its increasingly unpopular social policies.
As a result, a growing number of U.S.-based companies are reassessing their business in the Asian giant.
Apple, for example, recently warned that it expects to ship fewer iPhone 14 Pro and Pro Max model devices because the lockdowns have sharply curtailed output by Foxconn, its contract Chinese manufacturer.
The delays have accelerated the California-based company’s plans to move more iPhone production out of China to other countries such as Vietnam and Malaysia, according to The Wall Street Journal.
The effect of the ongoing situation in China on the two busiest container ports in the U.S. have been more than simply significant as fewer orders from belt-tightening retailers, warehouses at capacity inventory, vessel transfers between the adjacent ports, and goods being diverted through U.S. East and Gulf coast seaports all played a role in their disappointing cargo numbers.
Cargo volumes at the Port of Long Beach fell 21 percent in November 2022 year over year, according to the latest figures released by the port, which moved 588,742 TEUs overall in November as imports fell 28 percent to 259,442 TEUs when compared to the same time last year. Up to November last, the port had processed more than 8.6 million TEUs, a slide of 0.5 percent from the same period in 2021, which was the port’s busiest year ever.
Though the issue of congestion is waning somewhat at both San Pedro Bay ports, in November last, the Port of Los Angeles saw its overall cargo numbers drop by 21 percent year over year.
Through last November, the port had processed seven percent fewer containers overall than it did in the 11 months of 2021, a record year for the port.
Imports into the U.S. of a variety of China-made products from footwear and electronics to auto parts and sporting goods “have begun to level off, in addition to cargo that has shifted away from West Coast ports due to protracted labor negotiations,” according to Port of Los Angeles Executive Director Gene Seroka.
The import declines at both ports come after a two-year record run in volumes that have set monthly records at both ports.
“Consumers and retailers are concerned about inflation, leading to warehouses filled with inventory and fewer product orders from Asia,” said Port of Long Beach Executive Director Mario Cordero at a late September 2022 press briefing. “The respite is leading to increased capacity on the docks and fewer ships waiting off the coast to enter the port.”
True, many ocean carriers responded to the congestion and labor problems at West Coast ports by canceling calls or diverting their vessels to U.S. Gulf and East Coast ports, but the latest statistics show that the decline in transpacific imports is spreading to those ports, as well, as nationwide import volumes slide toward 2019 levels.
The latest figures show that, for the first time since July 2020, the ports of Savannah, Norfolk, and Charleston have all reported declines—11 percent, 13 percent, and 16 percent, respectively— in imports year-on-year, while Houston reported an 11 percent drop in imports over the same period.
There was much needed light at the end of the tunnel, though, when the nation’s economy dodged a bullet as the federal government took action to prevent a railroad strike that would have paralyzed the movement of countless containerized and bulk shipments, and cost the nation’s economy upwards of $2 billion per day.
The vote by the Senate, with bi-partisan support, to derail the work stoppage came just days before a December 9 strike deadline after a Presidential Executive Board approved the terms of the Tentative Agreements that had already been reached between the railroads and the unions involved.
“The freight and commuter rail systems are essential partners to America’s retailers, moving goods throughout the country every day,” said Matthew Shay, CEO of the National Retail Federation. “A nationwide rail strike at this juncture would have had devastating consequences for our economy, and exacerbated inflation for American families.”
While not altogether popular with the unions involved, the Association of American Railroads soundly endorsing the Senate’s vote, with Ian Jefferies, president and CEO of the organization, noting that the Senate “acted with leadership and urgency with yesterday’s vote to avert an economically devastating rail work stoppage.”
A rail strike “would have exacerbated an already fragile supply chain at a time when the industry is already struggling with hyper-inflation,” said Patty Long, President of the Railway Supply Institute in Washington, D.C. “This legislation prevents economic harm that would impact businesses and workers alike.”
The threat of a strike by rail workers brought to the fore the symbiotic relationship of the major movers that keep goods moving seamlessly along the nation’s countless individual domestic and international supply chains.
An interruption in rail service would have made the nation’s truck drivers’ lives more difficult, than they already are, said Owner-Operator Independent Driver Association President Todd Spencer in a press statement.
“We are pleased at the aversion of a potential strike that threatened to cause major supply chain disruptions,” he said. “Truckers were prepared to step up to help minimize any impacts on the American people,” Spencer said.
American Trucking Associations President Chris Spear reacted, stating that a rail strike “would have been disastrous” and “catastrophic.” The trucking industry alone, he added, “has neither the equipment nor the manpower to replace a single day of lost freight service.”
Last October, in a move underscoring the seamless connections between the modes that move the nation’s freight the BNSF Railway, which operates one of the country’s most extensive rail networks, said it will invest more than $1.5 billion to build a massive intermodal complex in California’s high desert region.
The 4,500-acre project—about 130 miles from the coast—will include a rail yard, an intermodal facility and warehouses for transloading freight, and, it said, “help ease congestion near the ports of Los Angeles and Long Beach and improve efficiency at existing intermodal hubs in the Midwest and Texas.”
Two months earlier, J.B. Hunt, the Arkansas-based trucking and logistics services provider, announced the start-up of inland container-only freight service between the BNSF’s new Port of Tacoma intermodal container transfer facility and Chicago.
The railroad’s Tacoma South intermodal rail hub can handle more than 50,000 annual container lifts, the railroad said, adding that the hub “will help the Seattle and Tacoma gateway accomplish a long-term goal of growing its domestic intermodal capacity.”
Looking to the skies, air cargo was a rare bright spot for airlines during the travel-starved years of the pandemic.
Cargo and passenger airlines captured a lot of freight business over 18 months when ocean carriers and ports were overwhelmed by supply chain bottlenecks, but industry experts say many shippers are shifting back to ocean in a big way as demand falters and shipping rates continue in free-fall.
The latest research study by Wyoming-based consultantcy IMARC Group—United States Air Freight Market: Industry Trends, Share, Size, Growth, Opportunity and Forecast 2022-2027—says the U.S. air freight market is expected to exhibit a Compound Annual Growth Rate (CAGR) of 4.47 percent through 2027.
Strong eCommerce demand and the slower return of passenger flights with belly cargo capacity drove airlines to convert older passenger jets to freighters and invest in new cargo planes.
In late November, Alaska Airlines’ cargo division, Alaska Air Cargo, said that it had selected Boeing to convert two 737-800 aircraft that Alaska will use for its cargo operations in Alaska. The first conversion will begin in 2023, and the second will be complete by early 2024.
Once converted, the aircraft will have a payload of almost 50,000 pounds and a range of almost 2,800 nautical miles. The conversion of the two 737-800s will bring the carrier’s cargo fleet to five aircraft, all 737 converted freighters. The five 737s are aircraft dedicated solely to cargo operations, but the airline also uses the holds of passenger aircraft for cargo on more than 1,200 daily flights.
In October, the nation’s air cargo sector received a major boost when the Federal Aviation Administration announced that more than $30 million would be invested in airport cargo infrastructure projects at nine U.S. airports—Ted Stevens Anchorage International Airport in Alaska; Chicago Rockford International Airport; Huntsville International Airport-Carl T. Jones Field in Alabama; Greenville-Spartanburg International Airport in South Carolina; Bishop International Airport in Michigan; and Washington’s Seattle-Tacoma International Airport.
Boeing, has projected that air cargo traffic will double in the next two decades as the industry shifts its focus to evolving demand following the coronavirus pandemic.
The expansion will be supported by a 57 percent growth in the global freighter fleet, which would put it at 3,600 aircraft, and will require about 2,800 new and converted freighters for growth and replacement until 2041, the company said in its most recent World Air Cargo Forecast.
A third of deliveries will be new jets, while the remainder will come from conversions, giving carriers the ability to increase their flexibility in existing and emerging markets, it said.
“While the air cargo market is returning to a more normal pace after historic demand in the last two years, structural factors including express network growth, evolving supply chain strategies and new cargo-market entrants are driving sustained freighter demand,” according to Darren Hulst, Boeing’s vice president of commercial marketing.
“In the global transportation network, air freighters will continue to be a critical enabler to move high-value goods, in increased volume across expanding markets,” he said.
Maersk Air Cargo launched early last year, and, in April, said it would “progressively deploy and operate a controlled capacity of five aircraft—two new B777F and three leased B767-300 cargo aircraft.”
Three new B767-300 freighters, the company said, “will also be added to the U.S.-China operation, which will be initially handled by a third-party operator. The new aircraft are expected to be operational from second half 2022 and onwards up to 2024.”
A nostalgic note…on December 6, 2020, Boeing’s last ever B747 rolled off the assembly line at the company’s Everett, Washington, facility, some 52 years after the first iconic ‘jumbo jet’ was built.
The 1,574th aircraft of its type, a 747-8F, is destined for New York-based Atlas Air, and will carry cargo for logistics provider Kuehne+Nagel.
The first B747 rolled out of the hangar at Everett Washington in September 1968, and, today, only 44 passenger and 314 freighter versions of the 747 are still in service.
The current version of the 747 is 250 feet and two inches long, the longest commercial plane now in service, or, interestingly, about twice the length of the Wright Brothers’ first powered flight in 1903.
Bio: Michael D. White is a published author with four non-fiction books and well more than 1,700 by-lined articles on international transportation and trade to his credit.
During his 35 year career as a journalist, White has served in positions from contributor and reporter to managing editor for a number of publications including Global Trade Magazine, the Los Angeles Daily Commercial News, Pacific Shipper, the Los Angeles Business Journal, International Business Magazine, the Long Beach Press-Telegram, Los Angeles Daily News, Pacific Traffic Magazine, and World Trade Magazine.
He has also served as editor of the CalTrade Report and Pacific Coast Trade websites, North America Public and Media Relations Manager for Mitsui O.S.K. Lines, and as a consultant to Pace University’s World Trade Institute and the Austrian Trade Commission.
A veteran of the United States Coast Guard, White has traveled in both Japan and China, and earned a degree in journalism from California State University and a Certificate in International Business from the Japanese Ministry of Trade & Industry’s International Institute for Studies & Training in Tokyo.