March 2021 Update On COVID-19 and Congestion in the US

Just as we’re seeing a backlog of empty containers in Melbourne, the US is experiencing unforeseen demand that has transformed capable shipping ports into overrun, floating traffic jams.

To gain a better insight into the current situation, we spoke to Oliver William, who looks after operations in the US. Oliver has been in the supply chain and logistics industry for over seven years and says he’s never seen port congestion like this. 

“The best way I can describe it is, ‘extraordinary’. In my years working in logistics and supply chains, this was one of the worst port congestions I have ever seen. If import frenzy continues to Q2 – Q3, and no one does anything about it we would be facing a ‘one-way trade’ which will create challenges for the entire supply chain.”

Certainly, a worrying situation to be in. Oliver tells us that we have the pandemic to blame for a sudden, sharp shift in consumer spending.

“The high import levels which are the result of increased consumer spending and subsequently retailers working overtime to restock their inventory. On top of this, there’s also a labour shortage due to COVID-19 which is overly concerning as spending has shifted away from services, such as movies and restaurants to physical goods, generating record-breaking import levels at the USA water gateways.”

Unfortunately, there’s no simple solution for the labour shortage. In order to stop the spread of COVID-19, additional safety protocols and social distancing rules have been enforced resulting in a slower process and an overwhelming supply and demand issue.

Not only is this an issue for US docks, but repercussions are also being felt across the globe. Because a majority of physical goods are made in China, shipping containers are idling in the US, resulting in a shortage of containers in Asia. In shipping routes with less demand, like Africa, Australia and New Zealand, many empty containers have remained there for an extended period of time.

When we asked Oliver for his opinion on what clients can do to mitigate the impacts of congestion, he suggested cargo redistribution. 

“I think cargo redistribution is one way to mitigate the impacts without significantly impacting a company’s cost. Routing the cargo via the East Coast instead of the usual LGB/LAX ports can result in longer times in transit. But longer transit times between points of origin and destinations can be more successfully navigated by forecasting the demand and proper pre-planning ahead of time.”

This is just a temporary solution, and it’s not clear when the situation will normalise. Perhaps, as vaccinations continue to roll out across the globe, we might begin to witness a shift back to more traditional spending habits and a healthier balance in supply and demand.

Stay tuned for further updates on port congestion in the US as the situation develops.

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