Maersk North America Market Update (December 2022)

Your supply chain’s well-being is our top priority. We at Maersk aim to provide you the most relevant and up-to-date information to help you navigate this period of heightened volatility.

Key Notes on North American Supply Chains

• A. P. Møller - Mærsk A/S Board of Directors Names Vincent Clerc CEO effective Jan 1: On December 12th the Board announced the planned transition of Vincent Clerc becoming Maersk’s new CEO. Since 2019, Clerc has been the CEO of Maersk Ocean & Logistics, which contributes a significant part of the company’s invested capital and results. Clerc is taking over from Soren Skou who, since 2016 has led the transformation of Maersk from a diversified conglomerate to an integrated logistics company.
• Chinese government reducing Covid testing and quarantine requirements: New rules bar officials from shutting businesses and locking down whole neighbourhoods, though buildings where infections are found will continue to be placed under lockdown. Covid patients with mild symptoms and their close contacts will be allowed to isolate at home instead of being sent to government quarantine facilities. Most requirements for virus testing will be eliminated, except for places with vulnerable populations. The government also reported it would provide more vaccination stations for the elderly and high-risk populations. Domestic travelers will no longer need to present a negative virus test or have their health codes checked when traveling to other provinces. Virologists warn that China will be hit with a large wave of Covid cases. The Chinese government announced plans to double the capacity of critical care beds and to increase medical staffing in such wards.
• ILWU / PMA negotiations languish while driving cargo to East and Gulf Coasts: Though West Coast ports continue to operate business as usual, more than five months have lapsed since the labor contract expired on June 30th. Most industry analysts believe that a deal will not be reached this year and cite potential labor disruption behind the shift of imports from West Coast to East and Gulf Coast ports, with the Port of New York and New Jersey gaining 85% of US West Coast Cargo diversions. Data for August through October revealed that the Port of NY/NJ overtook LA as the nation’s busiest port.

Schedules are designed to optimize the network while minimizing service disruptions to the greatest extent possible. Customers are invited to check in with their account teams and local representatives to share their CNY plans and learn more about schedule alternatives. Customers can also look for updates in their “Weekly Reader” email subscription.

The reduction in volumes have proven a boon to supply chain fluidity. According to Sea-Intelligence CEO Alan Murphy, global schedule reliability improved by 6.6 percentage points month-over-month in October 2022, reaching 52.0%. Maersk was the most reliable carrier in October with schedule reliability of 56.4%, followed by MSC at 52.7%. The average global vessel delay has dropped below the six-day mark. For Maersk, vessel transit times continue to improve with many routes approaching pre-pandemic era proforma standards.

The decrease in cargo transit times combined with high inventory levels and fluctuating consumer sentiment has supply chain managers shortening their planning periods. For some planners, what were once six- to eight-week forecasting cycles have been reduced to four, thereby reducing the need to predict consumer sentiment as far into the future as previously. Striving to be as efficient as possible in managing inventory flows, logisticians are looking to narrow the gap between when they arrange for overseas cargo shipments to when consumers pull the goods off the shelves. Some supply chain managers consider this approach as a way to potentially reduce costs, increase supply chain productivity, and improve customer satisfaction as the right product type is getting through to the final mile at a faster pace.

West Coast Highlights

Customers should be aware that most ports have reduced hours during the Christmas and New Year’s holidays and should check respective terminal websites as appropriate.

Vancouver: We expect to soon see vessel waiting times of just 0-2 days as new the proforma schedule change for the TP1, having been combined with the TP9. The combined service covers Eastern Chinese ports, Busan, Korea, and Yokohama, Japan.

Oakland has been steadily reducing vessel waiting time, which now ranges between 4-7 days. A labor shortage is expected through the holidays. Two cranes will be down for a week.

In Los Angeles, the gates will be closed first and second shift on Fridays and first shift on Saturdays due to low volumes. LA and Long Beach remain a source for surplus empties. Los Angeles Pier 400 APM Terminals has implemented surcharges for Late Gate and no Verified Gross Mass (VGM) as of Dec 1.

East Coast Highlights

East Coast Congestion has resulted in Transatlantic vessel voyage changes to and from Northern Europe as covered in recent Customer Advisory regarding the TA1 service. Bottlenecks have contributed to an accumulation of service delays. This situation is driven by several external factors, chiefly terminal congestion. The delay accumulation has resulted in gaps in the departure schedules that require adjustment.

Baltimore: The TP12 servicing Northeastern China and Busan, Korea into Eastern US is experiencing 5-day vessel waits. Transatlantic routes and US East Coast to South Africa routes are experiencing 2-3 days vessel waiting time. The terminal is experiencing limited reefer plug availability and is using power packs to support lack of reefer plug situation. The high volume of import reefers vs. available plugs is influencing the vessel waiting time.

Savannah: Vessel waiting time is 0 days for US Flag ships, 0-2 days for Class 1 (Transatlantic routes and East Coast to South-east Asia), and 12 days for Class 2 (coming over from mainland China via Panama or Suez). There are 17 ships at anchorage, two of which are Maersk. The Georgia Ports Authority expects to clear the backlog by early January. The GPA will also increase surcharges for Out-of-Gauge/break bulk cargo, which is cargo not suitable for standards container due to the cargo dimensions and which requires the use of special equipment. Expect increases to go into effect in late Q1 2023.

Houston: Vessel waiting time 2-days for US Flag ships, 3-5 days for Barbours Cut, and 8-10 days for Bayport. Customers should monitor Houston for fog impacts this season. The port is implementing a dwell surcharge on January 1.

Newark port complex: At APMT, waiting time is just 0-2 days with only two container ships at anchorage. There remains excess empty surplus. Maersk TP11 transit times from Columbo KCMB into Newark stand at 22 days with priority berthing, down from 31 days in early November. No forthcoming planned sailing gaps.

Landside Update

We are seeing customers take extra care this year to ensure they have a wider mix of options for their transportation capacity needs – whether that is brokerage-based, asset-based, or intermodal rail. For brokerage, the value is in being able to secure plenty of capacity to handle routine high demand along with additional ad hoc spikes. Whereas asset-based providers give shippers the assurance of control in knowing that specific, dedicated assets in terms of people and equipment are on hand for the job. When suited to the cargo, intermodal rail enhances the overall mix with a cost-effective, low-carbon emission option with significant capacity. And now that the national rail worker contract negotiations have concluded, the intermodal option has been infused with a great deal more stability than in years past.

Visibility has been a hallmark of supply chain quality for ages, though the pandemic era has forever increased the criticality of knowing exactly where your goods are in the supply chain. The platforms that keep shippers informed are complex and logisticians are deeply interested in how Transportation Management Systems (TMS) and Enterprise Resource Planning (ERP) platforms can be leveraged for their benefit. Not all visibility is created equal and details matter. For example, ensuring your fleet management geofencing solution automatically updates you on the relevant milestones in real time is essential for complete situational awareness. At the end of the day, shippers want to understand whether the visibility tools on hand will make the task of “track and trace” harder or easier, as well as how helpful the reporting tools actually are for managing their businesses.

Rounding out shipper considerations for building resilient transportation capacity models is risk mitigation through contract management. In an era of significant disruption, shippers understand the value of their long-term partnerships and the relationships that sustain them. Pairing these partnerships with shorter-term contracts is one way that shippers are managing market uncertainty this year. Rather than locking in for the long term, shippers are working with their trusted partners to better understand where the market is heading and to make only the shorter-term commitments and incremental adjustments necessary to balance the risks and rewards of a demanding marketplace.

“Headwinds in the air cargo industry persisted in October, including high inflation rates in advanced economies, weak performance in the global flows of goods and services, the ongoing war in Ukraine, and the unusual strength of the US dollar,” said the IATA in its latest report. “Global goods trade remained steady while air cargo’s relative growth performance softened. This stable trade performance is a positive signal for the world economy. Any easing of COVID-19 restrictions in China, including factory re-openings, will support the global trade recovery.”

Volumes are falling at a time when capacity levels are continuing to recover. The rebound in passenger travel as of September being about 75% of the 2019 level is a major factor in increased capacity as a significant amount of air cargo travels in the belly of passenger craft. With the reduction in Ocean shipping congestion and rates, some volumes are heading back from Air to ocean and pushing demand down along with other macroeconomic factors. Demand for air freight looks set to remain muted during the traditional Q4 peak season.

As extreme weather conditions are expected to affect ocean and inland services through winter, air will act as a reliable alternative this season. Maersk Air Freight will continue use its own controlled network to keep supply chains moving quickly when needed.

For more information on our air network and expansion, visit Maersk Air Freight.

Topics, Trends & Insights

Be sure to visit our “Insights” pages where we explore the latest trends in supply chain digitization, sustainability, growth, resilience, and integrated logistics.

Matthew Shay, President and CEO of the National Retail Federation, had predicted that the 2022 holiday shopping season would be returning to more “traditional” norms with covid lockdowns in the past and supply chain challenges easing. Instead, Shay reported an outright boom with 196 million Thanksgiving weekend shoppers out and about, 20 million more than a year ago. Shay cited more than 30 consecutive months of year-over-year retail sales growth since March of 2020. The NRF forecasts that 2022 holiday season shopping will outperform 2021 by 6-8%.

Consumer spending has been buoyed for months by pandemic-era savings and a strong job market with 10 million unfilled jobs and only 5 million active job seekers. U.S. Commerce Department October reporting detailed rising consumption, up from the previous month by 0.5%, with personal incomes rising by 0.7% as a result from a strong labor market and stimulus monies.

However, there are indications that consumer behaviors may soon shift. University of Michigan Survey of Consumers for November reported that consumer sentiment fell 5% below October. More than 60% of consumers reported plans to scale back their spending in the future. Darkening the picture, September data indicates that American saving rates were only half of what they were before the pandemic. And according to the Federal Reserve Bank of New York, credit card balances increased 15% in the third quarter compared to a year earlier, the largest increase in two decades. Given that forecasters consider consumer spending accounts for about 70 percent of total economic growth, any slowdown in consumer activity indicates potential economic headwinds for business.

Resources and Tools to Support You

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