The MVP Tea: Spilling The Supply Chain & Logistics Tea You Need To See

Edition: June 27, 2022

With the cost of fuel continuing to rise, many people are concerned about their wallets, and businesses about their profit. The G7 leaders have suggested a price cap on the revenue that Russia is earning from oil exports in an effort to curb their funding of military action against Ukraine.

Consumer Spending is Shifting

People are now spending their money on experiences rather than material possessions. This is a reflection of the changing priorities for many citizens in an increasingly inflationary environment where prices at home have been rising steeply over recent months due to fuel shortages and economic woes abroad, with demand in Chinese manufacturing declining by 30%.

Potential Cybersecurity Threat for Shippers

A new cybersecurity threat has emerged which could put further strain on businesses. Hackers can bring ships and planes to a grinding halt. Shipping giant Maersk was the victim of the NotPetya attack that occurred in June 2017, which resulted in a loss of $200 to $300 million projected revenues.

Port Congestion, Dwell Times and Shipping Container Volumes

Recent developments in China have shown that when faced with a crisis, they are able to quickly resolve it. The recent lockdown at the Port of Shanghai caused delays and congestion, which was troublesome for both businesses as well as consumers who rely on goods being shipped through this port. Recent data indicates 72% less congestions since our last update one month ago.

The number of ships docking at ports around China have fallen dramatically over the past month. At the port of Shanghai there was a significant decline in the number of vessels in port (44%), but the expected number of arrivals increased significantly (28%), resulting in only a 4% decline in congestion since our last update. There is a similar trend with the Port of Ningbo with a 70% decline in vessels in the port, and a 2% decline in expected arrivals.  Looking at the Port of Los Angeles, the number of empty containers saw a significant decline (15%) likely showing that many of the incoming vessels may contain empty containers that are not likely to be filled with new merchandise.

The data from Freightos container spot rates support the idea that there is a vast reduction in demand for shipping out of Asia to the U.S. The cost for a 40 foot container from East Asia to the United States west coast has declined by 42%, while the cost to the east cost has declined by 31%.

While this will help slow down the pressure on supply chains, it appears what happens with containers when they are off the vessels is not improving. According to the Pool of Chassis for the Port of Los Angeles, there has been a slight increase in the street dwell times for 40 foot containers, continuing to hover well above the allotted free days before demurrage and detention charges kick in. The utilization of chassis continues to creep higher as well, sitting at 89%. What further exasperates the delays are backups that are occurring at the railyards.

It is evident that there are many challenges that businesses currently face. However, by understanding the current landscape and making adjustments accordingly, businesses can weather the storm and come out stronger on the other side.

MVP Tea 06.27.2022

MVP Logistics is your logistics partner for supply chain, warehousing and fulfillment, transportation and logistics needs. Get access to expert transportation and logistics management and enjoy peace of mind knowing your shipments are in good hands. Find your solution today.

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