Port Congestion: Has The Ship Gridlock Peaked?
Container Ship “Houston Express” sits docked, waiting for its cargo to be unloaded.
After the holidays, the ports usually slow down some, but the pandemic has presented unprecedented situations in all aspects of import and export shipments. The backlog spiked in June of 2021 and has continued to compile except for what we have seen in the last three months. Jon Coustas, the CEO of Danaos, stated the current shipping situation. He said in February, “We have seen a steady situation at the ports. It is not worsening, but it is not getting better either. It has stabilized.”
Some other experts chimed in on this matter, and the Chief Economist of Flexport, Phil Levy, reported to American Shipper: “I think there are some reasons to think things may be easing off. I think this one bears watching a little more closely. One reason is that when we had the big boom in bringing stuff in, it coincided with money being sent out by the government and real disposable income going up. We don’t see anything like that [from the government] on the horizon, and instead, you’ve got real disposable income sagging. We always knew there were two ways this could ease off: the overall amount of money people had to spend could go down, or, of whatever they had to spend, less would be devoted to goods and more to services. And the share of goods in personal consumption expenditures has started to go down a bit. So, we might be getting both at the moment.”
The New York Federal Reserve has created a monthly index that features global port congestion levels called the Global Supply Chain Pressure Index (GSCPI). The GSCPI includes 27 different components and two shipping indexes, the Baltic Dry Index (BDI) and Harpex index. This tool was created to understand better potential issues disrupting the global supply chain. Since January. 28, the GSCPI generated ex post facto numbers through the last two months of the year. In October, it showed peak levels at 4.37, followed by a slight deceleration bringing the GSCPI to 4.246. The West Coast is experiencing much more significant declines.
The Ocean Timeliness Index (OTI), which is another congestion indicator, has shown some small deviation from the new normal high congestion rates. The OTI showed that cargo took an average of 110 days to ship from the Asian factory to a North American port during the last week of January. These numbers are similar to the congestion seen around the holidays. The transit record was 114 days during the second week of January 2022.
Levy continued, “One thing you also have to remember is that there is a backlog, so if you do get a demand letup, it will take a while to clear things. We’re still way away from normal. The question is: Can this all be cleared by the time we head toward the next peak season? And is this problem going to go away without any offsetting problems on the supply side, like the West Coast port [labor] negotiations? For you to sound the definitive all-clear, you need a decrease in demand, you need no problems on the supply side, and you need a period when you can clear everything out before we hit peak season. That’s a bunch of things that all have to go the right way.”
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