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Container transportation supply may become the biggest risk in the second quarter. Congestion in US ports continues to increase, and cargo orders are still rising

With the start of the second quarter, there is no sign of any decline in US container imports. On the contrary, with fiscal stimulus measures and lower inventories leading to the need for more replenishment, freight demand is increasing.

The biggest risk for container transportation in the second quarter was not the demand for goods, but the supply of transportation.

One of the consequences of the Suez Canal accident is that it will restrict the availability of ships and containers, leading to longer delays. By the end of the quarter, shoppers in US stores may find more empty shelves, and online shoppers may increasingly see the term “out of stock”.

▍The inventory is at a low point, and the order quantity is still rising

Positive data on demand is constantly accumulating. The ISM customer inventory index fell to 29.9 points last week.

Timothy Fiore, Chairman of the ISM Investigation Committee, said: "This sub-index is the lowest record since its establishment in January 1997." "The index has been at a historical low for eight consecutive months."

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Deutsche Bank (Deutsche Bank) transportation analyst Amit Mehrotra said this declining index tells us that as retailers gradually abandon just-in-time inventory, there are more ways to replenish demand. "

Generally, if demand exceeds inventory replenishment, import demand will increase. Mehrotra expects that due to increased consumer confidence driven by inventory replenishment and vaccines and stimulus measures, freight volumes will remain strong for a longer period of time.

According to data from FrieghtWaves' SONAR platform, starting from the scheduled departure date, the China-US booking index hit a record high last Friday.

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The inbound cargo index of all countries to the United States reached the highest level in history. The index also tracks bookings for the next 7 days, showing that there will be a new all-time high this week.

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The cargo tracked by this data will not arrive at US ports until late April or early May. Although ports are under great pressure now, they will face even greater pressure in the near future.

▍Congestion in U.S. ports has increased, and the waiting time for container ships has been extended to 8 days

The Port of Long Beach accounts for about one-third of US imports, and the port has been in congestion over the past few months. According to the Southern California Ocean Exchange, on Thursday, 28 ships were parked near the coast, waiting for the opening of the unloading site at the Port of Long Beach.

At present, ship congestion in the port continues to increase, and the waiting time for unloading containers has been extended to 8 days. This is about three times the average delay in November last year. There are 15 ships at anchor, with an average anchoring time of 8.0 days, and 7 ships waiting to be pre-anchored.

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According to officials monitoring the maritime traffic in San Pedro Bay, as of Sunday, a total of 28 container ships were parked at anchorages waiting to enter the port, up from 26 a week ago, but still below the peak of 40 in early February. Another 16 ships will arrive in the next three days, and 7 of them are expected to enter the anchorage and wait in line.

According to the latest data from the Los Angeles port signal platform on the 5th, this week's cargo volume has increased by 20.39% compared with last week, and next week is expected to increase by 15.24% compared with this week. In the past two weeks, cargo volume has not decreased but increased, and the relief is still not optimistic!

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Los Angeles/Long Beach at anchorage and ships at berth
According to data from the Port of Los Angeles, these ships carried millions of dollars worth of popular imported goods, including furniture, auto parts, clothing, electronics and plastics. Due to port congestion, the supply of these materials may be severely in short supply in the United States.

However, the Southern California port delay is only a microcosm of the global supply chain crisis. The ships waiting to unload outside the Southern California port may carry thousands of containers. This will also exacerbate the global container shortage and cause transportation delays.

At the same time, in Northern California, ship location data showed that there were 14 ships at anchorages near Oakland last Friday. Since February, the number of anchorage ships has been increasing by double digits.
▍The impact of the Suez Canal incident is coming

According to Reuters, the Egyptian Suez Canal Authority (SCA) stated that as of the 3rd local time, all the 422 ships stranded at both ends of the canal due to the "Long Give" freighter stranded had passed, and the "congestion" of the Suez Canal had ended.

But the Suez Canal accident is putting more pressure on the already strained global system. Even with a surge in traffic, more and more ships are arriving. After passing the canal northward, the container ship will sail to Europe or the east coast of the United States.

Nathan Strang, head of global shipping at freight forwarding company Flexport, said in a webinar: "We will definitely see this in European ports. Too many ships arrive at the same time, causing congestion."

"The time that ships stay in the port may be reduced in an attempt to restore the timetable. This will cause export goods and containers to be left behind." He added, "Flights to Europe and the East Coast of the United States will be delayed."

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Strang also speculated that shipping companies may cancel voyages on other routes in order to divert more ships to Asia-Europe routes to offset the impact of the accident. He said: "Shipping companies may start to cancel trans-Pacific and trans-Atlantic routes and switch to the more lucrative Far East routes."

The Suez Canal accident will also lead to an overall decline in ship capacity and containers, resulting in a domino effect. The interruption of the canal and congestion in European ports will limit the number of empty containers shipped back to Asia. In turn, this will reduce the number of empty containers that can be used to fill the trans-Pacific route that is full of Chinese exports.

For shippers, a further aggravating challenge is that both Maersk and Hapag-Lloyd have temporarily suspended short-term bookings in some areas. As of last Friday, Maersk’s short-term bookings from Asia to Northern Europe and North America have been suspended until further notice.

All these factors add up-rising consumer demand, very low inventories, suspension of some bookings, delays in voyages, and suppression of ship capacity and containers due to the impact of the Suez Canal, which will further increase the pressure on the global supply chain.