If 2020 was the year of COVID-19, 2021 has become the year of “living with COVID-19.” Such conditions have also prevailed in the freight transportation industry coping with and adjusting to a pandemic-driven environment.
For an entire year, the industry has agonized through a deficiency of supply at all levels and modes of containerized goods transportation. These deficiencies were exacerbated by unending consumer demand in the US as the transition from consuming goods back to services has been lethargic. COVID-19-driven US import demand on top of traditional peak season volume has resulted in a record number of vessels deployed by both new and existing operators, as well as some major importers contracting their own chartered space and equipment.
Supply side challenges will continue in 2022, especially in trucking, rail, warehousing, and workforce. A shortage of landside workers will likely provide greater leverage for the International Longshore and Warehouse Union (ILWU) in upcoming West Coast labor negotiations. The historic profitability of ocean carriers should also support the union’s negotiating influence, given that ocean carriers are the primary source of income for the marine terminals that employ ILWU workers.
As for vessel supply, any new capacity ordered in recent quarters will not be delivered until 2023–24, and thus capacity from new entrants and cascading supply from other trades for alliance carriers will continue to support demand in year 2022.
Annual ocean service contract discussions can and will start early, and talks of multi-year arrangements will be pressed, more so by ocean carriers, given the higher freight levels. However, acceptance of multi-year agreements will still end up being minor compared to annual and spot space arrangements, which will again be the primary means of importing containers from Asia to North America. As “living with COVID-19” becomes more the norm, more space will be made available in 2022 under ocean carrier contracts than what was available in 2021.