Supply Chain Industry Insights

December 2022

By Tim Gundlach

In the United States the biggest concern for November was the possibility of a rail strike on the West Coast. As a result, most ocean cargo was diverted to the Gulf and East Coasts. This shift helped clear the port & rail congestion issues for the West Coast ports and inland rail yards, but shifted those issues to the Gulf and East Coasts. To add to challenges on the East Coast, on November 10th, a late-season tropical storm increased in strength and became Hurricane Nicole. The hurricane made landfall near Vero Beach, Florida then made its way up the East Coast impacting the ports of Miami, Tampa Bay, Jacksonville, Savannah, and Charleston before weakening into a tropical storm and heading back into the Atlantic Ocean.

Simultaneously, the world’s economy continued to slow with steamship lines & airlines pulling capacity from Transpacific routes. The reduction in demand outpaced the reduction in capacity which resulted in a continuous drop in rates for both air and ocean transportation. The increase in blank sailings then began to manifest itself in other ways, like ports becoming clogged with empty shipping containers. The Port of New York and New Jersey were forced to threaten ocean carriers with potential penalties to accelerate the removal of the empty containers which numbered as high as 200,000 in July of 2022.

On November 14th, the Australian supply chain became an area of focus as the nation’s largest tug-boat operator planned a crew lockout over a bitter 3 year pay dispute. This planned lockout would have prevented harbor-towage employees from working, and would result in disruption of operations at 17 ports across Australia. On November 17th, Australia’s Fair Work Commission announced that the lockout would not proceed as planned.

In northwest China, a deadly fire led to the death of 10 people due to “zero-Covid” lockdown measures. Protests spread to major metropolises across China. On Dec 3, it was announced that there would be an easing of testing and quarantine rules.

In Korea, On November 23rd trucker unions began a nationwide walkout causing estimated daily losses of about $224 million USD. This is the second major strike in less than 6 months by thousands of truckers demanding better pay & improved working conditions. On November 29th, the South Korean Govt took the unprecedented step of involving tough strike-busting laws after failing to reach a deal with unions. This marks the first time that a South Korean administration issued an order to force transport workers back to their jobs. As of December 5th, the strike organizers said that they would defy the order.

Back in the US, the rail strike was delayed by the Brotherhood of Maintenance Way, pushing it back to early December. Meanwhile, more than 400 business groups joined in pleading with Congressional leaders for quick action. Although President Biden and Democrats had been unwilling to block a strike in September, this time they felt that they had no choice but to act. As of December 5th, Congress is introducing legislation to keep workers on the job.

Here is what we can expect as we enter December:

  1. We expect continued slow demand to continue with flat or declining rates until early January when there may be slightly higher demand due to the Lunar New Year which will take place on January 22, 2023.
  2. Various labor issues are likely to continue in parts of the globe.
  3. In China, although there is some easing of the zero-Covid policy, the next few weeks could be difficult for the Chinese economy. With the significant risk during the winter months just prior to the Lunar New Year Holiday, further restrictions would probably be imposed nationwide again impacting manufacturing and cargo transportation.
  4. Transportation related issues due to the Ukraine conflict remain unchanged.

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