Supply Chain Industry Insights
Welcome to the PGL Industry Insights report for April, 2023.
Is the supply chain back to normal? In this edition, we explore the factors that inform the answer to this question.
The Global Supply Chain Pressure Index (GSCPI), published by the New York Federal Reserve, suggests that supply chain conditions are returning to normal. However, other factors such as reduced consumer spending and full warehouses continue to affect the flow of goods. Eased port congestion is certainly a good thing, but the reasons why are cause for concern.
One key factor is U.S. West Coast labor agreements which have been in negotiations since the previous contract expired in July of 2022. The International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) have reached a tentative agreement on certain key issues for a new labor contract, but details have not been disclosed. This is good news, but until a new contract is in place, anxiety remains high.
In addition, the recent agreement by the OPEC+ group to cut oil output by 1 million barrels per day starting in May has led to an increase in diesel fuel costs. This comes after a period of declining prices since October 2022, posing further challenges for transportation and logistics.
The ocean market has rebounded from the drop in volumes during the Lunar New Year, but the recovery has not been robust. While carriers have implemented rate increases in April, commercial and labor headwinds are affecting the medium-term outlook. Blank sailings, which have cancelled out up to 25% of weekly capacity deployed on trade lanes, have helped maintain high load factors to the West Coast. However, weaker vessel utilizations are observed in the East Coast and Pacific Northwest services.
While some carriers are planning to raise spot rates again on May 1st, it is not yet a trade-wide initiative. East Coast rates may also slip in the coming weeks, as load factors remain underwhelming, even after recent rate increases brought them closer to long-term contract rate levels.
With the latest in supply chain news, we’re seeing something approaching normalcy when it comes to port activity, but the future is not yet written and as we see, many factors influence the grand scheme of things. In the meantime, PGL will continue doing what we do best, delivering peace of mind, 24/7/365.
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