Here is the latest in a long series of supply chain catastrophes. China’s drought has severely affected hydroelectric power, and in the area of Sichuan province, factories have had mandatory power shutoffs. A number of these are chip factories and solar panel makers, as well as battery makers. All these are much-needed products for integration into items for consumers.
Shipping prices from China by ocean continue to fall, and these shutdowns will reduce the number of export containers. And according to Container xChange, the demand for empty containers for export is also lower than expected.
Flexport’s chief economist seems to think that’s possible.
He points to the fact that there won’t be any more stimulus checks to generate more demand for consumer goods. And the graphs show a rollover after a peak in January. The chart is telling:
Source: American Shipper, Chart: American Shipper based on data from Marine Exchange of Southern California
Flexport is a major broker and forwarder, based in San Francisco. They have a very thoughtful approach to understanding what they face in their markets. A pronouncement from them has some weight. Flexport just managed to raise $935 million to continue their advancement. That’s a bunch of capital.
The backers are big names, too. Andreesen Horowitz is a major VC with many successes to its credit.
It’s too early to declare victory. over port congestion. More demand will come. There is a lot of replenishing of inventory going on. And the excess empty containers at LA and Long Beach, and elsewhere as well, are still a big source of onshore logistics problems. And the truck driver shortage, and the Great Resignation. And demand is still elevated; when people can’t travel or go to restaurants, they buy stuff.
But with recognition of a problem, and it’s certainly well recognized now, people have started to work on solving the many little bottlenecks that conspire to make a supply chain grind its gears. Perhaps we will see a slow unwinding of the problems.
Greg Miller, Senior Editor Tuesday, February 8, 2022
FedEx Freight has chartered some small ships and arranged with a few shippers to ship full 53-foot containers manufactured in China to the US Port Hueneme, CA. Port Hueneme is a small facility jointly used with the US military. Cargo use is allowed when there is no overriding military activity.
Doing this will allow FedEx Freight to bypass the logjams at the Port of Los Angeles and the Port of Long Beach. It also allows FedEx Freight to put the containers on its rail network for long-distance transport to inland locations. FedEx Freight is mostly an LTL service; ultimately most of the containers will be unloaded at a FedEx depot for the last mile of transport.
Other firms have been following similar strategies recently. It’s one way of getting past the bottlenecks in the LA/LB area. That should help FedEx customers. But the ships are small, and the volume will not be large. It will also produce more empty containers here in the US, and FedEx will need to figure out where to put them and how to get them back to China or elsewhere for another trip.
To the extent the bottleneck is due to surplus empty containers and a shortage of chassis, and irrational appointment behavior for delivery of empties, all this does is route a bit of cargo by another path. But no one should be criticized for examining and using alternate strategies in these hectic times.
Eric Kulisch, Air Cargo Editor Friday, January 14, 2022
Supply Chain and Logistics 