Annual Review and Outlook

Most US container terminals had two years of record growth and the pandemic highlighted the importance of port operations to consumers and to businesses.

Over the last thirty months, shippers and their suppliers have been through a lot. Tumultuous change and disruption stemming from the COVID-19 pandemic permeated all facets of life, impacting companies, customers, providers, teammates, and international supply chains.

There have been three recent stages of evolution. Pre-pandemic, pandemic, and post- pandemic. Container shipping has seemingly been battered, embraced, and — going forward — something in between!

I see 2023 as the great reset. We will dust off business rules thrown by the wayside during the pandemic and be more strategic in our volume awards.

Change is a constant in our industry, so I would always be cautious about saying things have changed ‘irrevocably.’ One of the biggest opportunities — and challenges — we face is the move toward green fuel and the deployment of energy-efficient technology.

Let me first say that it is always tricky to make these kinds of forecasts. Who could have predicted the humanitarian crisis in Ukraine just one year ago or the present energy crisis? But let’s give it try.

A broken record is a good thing if you are Aaron Judge hitting a record-breaking 62nd home run, as he did this past October to end Roger Maris’ 61 year reign as the American League’s single- season home run king.

Performance from US cotton shippers has never been so compromised. Failure to execute threatens the competitiveness of US agriculture and certainly the fate of our members, who provide the key services of risk management, logistical services, and liquidity provision to the broader market.

Participating government agencies and the trade community need to revive the collaboration and cooperation that led to the advancement of Coordinated Border Management initiative and One US Government at the border.

While declining import volumes are reducing port congestion, reduced sailings are challenging US agriculture exporters’ ability to be dependable suppliers to global markets.

The era of COVID-19 has now stretched to nearly two years, and it can be difficult to remember pre-pandemic realities. The past year brought plenty of changes, but one constant has been the retail industry’s commitment to serving its customers and communities. The ongoing supply chain disruption in the US has been a defining narrative of 2021. Historically more of a behind-the-scenes workhorse, retail supply chains have spent the past several months in the national spotlight. This has motivated national interest both in solving current problems and in ensuring systemic, long-term issues are resolved to maintain economic growth and global competitiveness. As historic levels of much-needed investment in roads, bridges, rail, and port infrastructure come to fruition, it’s essential that large shippers and users of infrastructure have a prominent voice in determining where funds are applied to maximize impact. The industry must also commit to strengthening data infrastructure and developing interoperable data standards that can enable the visibility and plannability necessary for today’s light-speed supply chains. The Biden-Harris administration should continue bolstering the US Federal Maritime Commission’s (FMC) oversight of foreign-owned ocean carriers, alliances, and port terminal operators, sending the message that fair and open supply chains are essential to the American economy. Advancing the Ocean Shipping Reform Act of 2021 is a key aspect of this effort. Leading retailers continue to flex exceptionally adaptable supply chain networks, operated by logistical ninjas who solve problems through collaboration with suppliers and service providers. In 2022, retailers will need to navigate inflationary pressures, taking significant measures to manage costs and increase supply chain efficiency. As online retail sales remain strong — Adobe predicts annual US e-commerce sales will surpass $1 trillion for the first time in 2022 — large retailers will continue to optimize their networks to increase speed and flexibility. Inventories remain below normal levels, and as retailers restock, many are trending away from lean, just-in-time philosophies. Forward-deployed distribution and fulfillment, located closer to the customer, will be enabled by increased automation and cutting-edge analytics. Disruption will continue throughout 2022. Production setbacks, challenging labor shortages, soaring costs in all freight modes, constrained capacity, equipment dislocation, port congestion, and the various supply chain challenges that predate the pandemic will not be solved overnight. Consumers can bet on retailers to remain resilient. Circumstances are always shifting, and retailers will keep adapting to deliver for their customers.

When ports closed and sailings were blanked in early 2020, many outbound containers were stranded at quaysides and terminals around the world. As trade recovered, thousands more boxes were left behind due to ships being full or skipping port calls altogether. Never slow to spot a pricing point, ports and terminal operators slapped daily storage fees on these idle containers, often amounting to several hundred dollars, as they waited sometimes weeks for the next sailing. But who should pay these unexpected costs? One unexpected lesson from the COVID-19 pandemic was the importance to shippers of their choice of Incoterms®, the contractual clauses intended to answer this question. Most shippers of containerized goods favor the Free Carrier (FCA) Incoterm, under which buyers nominate the carrier but pick up the bill once the container is lifted from the seller’s vehicle delivering it. This would include those pesky storage charges if the container subsequently got rolled. Other shippers persist with the obsolete Free on Board (FOB) terms, under which they supposedly take delivery of a container alongside a vessel at berth — in a modern container port? — but don’t take responsibility for costs until the container eventually crosses the nebulous “ship’s rail,” thereby avoiding any charges for delays caused by the carrier they chose. Potentially good for buyers but legally suspect, FOB leaves exporters sore at paying the costs of a party with whom they have no commercial relationship or negotiating power. This prompted Sri Lanka back in 2016 and India as recently as last October to mandate the use of FCA terms for all export traffic, as the terms are purpose-built for containerized operations and align obligations with commercial benefits. Shippers should look to sort this matter out among themselves in 2022, before other governments follow that lead.

During the second year of the COVID-19 pandemic, ZIM has reaffirmed its strong belief that agile, fast-moving organizations are crucial if the industry is to cope with the rapidly changing realities in the market. Carriers and other service providers learned to adjust quickly to new situations, such as remote working, while continuing to provide quality service to customers. ZIM, for example, created new dedicated e-commerce lines in response to market demand and introduced new products within a very short time. Another important lesson from the COVID-19 crisis was the importance of developing and promoting innovative digital tools for shippers. Use of electronic bills of lading, for example, has increased dramatically. The far-reaching impacts of the pandemic have led to the current supply chain crisis in the US, and the lack of capacity and equipment. ZIM has dramatically increased both our container fleet and the number of vessels we operate in order to keep up with the growing demand, including a long-term chartering deal for 25 “green” vessels fueled by liquefied natural gas (LNG) due in early 2023. The problem, however, is not solely in the carriers’ ability to provide capacity, but rather bottlenecks due to insufficient inland infrastructure. Looking ahead, there are two main challenges for the shipping industry. First, putting the supply chain crisis behind us through a coordinated effort of all stakeholders. It’s a massive challenge that will require resources, coordination, and planning. The other major challenge is the implication of the climate crisis on the way carriers operate. Environmental issues are increasingly a key consideration for carriers as the industry moves toward an emissions-free future.

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.

The COVID-19 pandemic has constrained shipping operations during both 2020 and 2021, as the initial reduction in volume during early 2020 was more than eclipsed by increased demand in the second half of the year and through 2021. Hundreds of vessels are stuck at anchor awaiting access to ports around the globe. In assessing the problem, fingers are pointed at terminal operators, longshoremen’s unions, truck drivers, and others involved in the supply chain that moves goods from factories in China to the shelves of the local Walmart. But the people who have suffered most from these unprecedented shipping delays are the seafarers. Delays in ships reaching port often result in extended contracts and minimal to no opportunities for shore leave, both of which strain seafarers’ mental health. Looking to 2022 and beyond, the industry needs to acknowledge, first and foremost, that seafarers are key workers. And yet, while the Secretary General of the International Maritime Organization (IMO) has called for countries to grant seafarers key worker status, only 60 of the 174 IMO members states have done so to date. This status is essential to seafarer well-being as they work to keep commerce moving and the world economy working. Second, nations need to prioritize vaccinating their seafarers against COVID-19. While the United States and some European countries have done an excellent job of vaccinating international seafarers regardless of nationality, those seafarers may require annual boosters to remain healthy and protected. In the immediate future, the success of international shipping depends upon a healthy, well-trained, and committed workforce of men and women to crew the vessels that allow trade to flow smoothly. In the past year, the Seamen’s Church Institute, along with other seafarer welfare organizations, has partnered with port authorities, agents, and ship owners to get seafarers vaccinated and to encourage shore leave while in port to improve both the physical and mental wellbeing of this essential workforce.

The lessons learned from the COVID-19 pandemic and resulting supply chain disruption continue to evolve. Some aspects of the virtual working world may be here to stay, but many companies continue to insist that employees be available for in-person engagement. Strong and purposeful leadership is more critical than ever, since qualified employees are in high demand and short supply. Virtual candidate interviews are likely to remain the norm, thanks to ease of scheduling, availability of interview participants, and cost savings on travel. Subsequent interviews with prospective employees, however, continue to trend toward the traditional in-person format. Shey-Harding also expected to see more flexibility in hiring candidates not within commuting distance of the organizations with which they are seeking employment, but that hasn’t proven to be the case. Clients have indicated a desire to collaborate more regularly in person and re-establish a less virtual corporate culture. While some degree of remote work is a continuing trend, our client companies generally remain unwilling to rely on team members that need to take a flight to get to the office. The importance placed on accessibility to the workplace suggests that companies see the value in a more traditional office culture and consider teamwork and camaraderie an important part of recruitment and retention. Leaders are more pressed than ever to nurture a sense of value, belonging and yes, fun, to ensure they can hire and retain exceptional people. Organizational culture is particularly critical now because this is very much an employee’s market. Some organizations now rely on going outside the industry to find candidates with more general experience that will be transferable to their businesses. The good news for those firms is that there’s little need to explain what “supply chain” is these days given the current global headlines. More than ever, identifying, attracting, and retaining exceptional people is critical. The best professionals are in high demand, so it’s essential that your organization is one that they’re vying to work for.

The disruptions in the global supply chain have been front-page news since late 2020, and regrettably, they are not on track for a near-term correction in 2022. This is a marathon and not a sprint, despite proclamations from politicians and port officials. Also front and center in the headlines has been the issue of equipment shortages. These shortages certainly exist, but any container shortages are directly attributable to network constraints and dislocation, rather than a lack of investment or a slowdown in manufacturing. Trade imbalances, increased dwell times, and longer cycle times will continue to exacerbate box shortages well into 2022. This will especially be the case for refrigerated equipment. And although shipping lines have become a convenient scapegoat throughout this network turmoil, they have acted quickly and responsibly, investing heavily in new equipment to meet customer needs. Container lessors, which continue to account for 50 percent or more of the global dry and refrigerated equipment fleets, have also invested in support of this unprecedented surge in demand, working closely with carriers to provide equipment where and when it is needed. Annual global equipment production has averaged about 2.8 million TEU over the last five years. In 2020, more than 3.1 million TEU of containers were produced, despite production being significantly slowed in the first half of 2020 due to pandemic-induced weak demand. In 2021, production of new equipment is expected to exceed 6.2 million TEU, more than double the five-year annual average. Newbuild dry container prices have hit record levels in 2021, while prices for newbuild refrigerated equipment increased more modestly. As congestion eases and cycle times normalize, equipment shortages should lessen, perhaps by late 2022.

The COVID-19 pandemic has taught the logistics industry a great deal about resiliency. In particular, the challenges of the last year and a half have underscored a few key factors that drive the resiliency of the Port of Vancouver, Canada’s largest port. The first is the ability of businesses in the port to handle the most diversified range of cargo in North America, as well as providing access to 170 countries around the world, keeping Canadians and Canadian businesses connected to essential goods and international markets. The second is the dedication of the businesses, organizations, and people within the various supply chains and port community. Thanks to the hard work and determination of terminals, railways, truckers, pilots, marine services providers, longshore labor, and many others, the Port of Vancouver has remained open and trade has continued to grow, despite the global supply chain challenges we all witnessed. The third factor that drives the port’s resiliency is the strong investment in trade-enabling infrastructure — critical to the efficiency of the supply chain — that we are leading, with partners, in order to create capacity and enhance the fluidity of goods movement throughout the region. Because of these strengths, trade movement through the Port of Vancouver has remained remarkably fluid despite issues throughout the global supply chain. However, the industry needs to put in more work today to mitigate the supply chain issues and capacity crunches of tomorrow. Given the current disruption, it’s critical to continue planning for long-term growth through infrastructure investments in Vancouver such as the proposed Roberts Bank Terminal 2 project and to protect the industrial land needed in the region to maintain a secure supply chain as trade through Canada continues to grow.

The COVID-19 pandemic has forced industry members and consumers alike to think more deeply about the global supply chain and the processes and people that help keep it working. The Port of Portland is learning a lot of lessons that we hope will make us stronger for the years ahead. First, bigger isn’t always better. The Port of Portland is experiencing more calls than in the last decade from shippers working to avoid congestion at West Coast ports. In a globally connected world, shippers need to have a variety of options — and backup options — to get their goods to market. And shipping companies are recognizing that diversity, flexibility, and variety are the best solutions, not just the largest container ships. Second, when specialized ports do get new opportunities, it’s imperative to manage the peaks in volume, working with longshore labor and employers to quickly increase the workforce to meet demand. Portland has also benefited from creative use of space at terminals, shifting the boundaries of dedicated areas to meet surges in demand. Finally, the supply chain industry needs to support its workers. Seafarers, primarily people of color, continue to experience significant issues with repatriation, some of them unable to get vaccinated as they travel in and out of countries ravaged by COVID-19. The Port of Portland has been grateful for the local groups of volunteer health workers that have visited vessels calling our terminals and provided vaccinations to visiting seafarers free of charge.

The challenges facing the US container shipping sector in 2022 are big, but despite their complexity, there is a path forward. Front and center are elevated levels of cargo and the import-export trade imbalance. The entire supply chain must make the most of our existing infrastructure and assets to handle this new normal. Collaborating to push cargo off port terminals is a must. Operating 24/7 could play a key role if all links of the chain are on board. And with the federal infrastructure bill signed into law, our aging roads, bridges, waterways, and rail infrastructure will get the real dollars needed to make transportation safer, faster, and more efficient, strengthening the backbone of the logistics industry. To correct the trade imbalance between imports and exports, stakeholders need to redouble efforts to ensure American manufacturers and farmers can get their goods and produce overseas. Access to global markets is vital to American jobs and a strong economy. Increased digitalization and better workforce training are also key to the future success of the freight transportation industry, which has made gains in leveraging technology to increase efficiencies but needs to do more in this area. During this crisis, for example, we found that one-third of trucker appointments went unused. That’s an inefficiency that digital solutions can address. US West Coast ports are blessed with highly skilled longshore workers who routinely upgrade their skills to keep pace with changing technology. The broader industry needs to make sure all workers across the supply chain — truck drivers, warehouse workers, and others — have opportunities to train, upskill, and reskill. Ports and transportation providers also need to hire more of these essential workers, and their compensation must reflect their value. The global COVID-19 pandemic has spotlighted these familiar issues, lending new urgency to working together to meet the moment.

Arising from the headlines of 2021 was a clear focus among leaders of the goods movement industry on finding the means and measures for supply chain operations to cope with both the ongoing surge in imports and future demand. The Port of Long Beach projects that trade will only continue to grow over the next 10 years. So the question remains, what will make the difference in 2022 and in the longer term to allow the supply chain to handle such volume? I believe the answer is 24/7 operations. With the Biden administration’s support, the Port of Long Beach, in partnership with the Port of Los Angeles, is working to implement a framework for extended hours at the San Pedro Bay port complex. But the ports can’t do this alone. For this to work, the entire US supply chain must get on board. Cooperation from all sectors of the goods movement industry will keep businesses supplied and consumers satisfied no matter what surge occurs. This is important to maintain the country’s continued economic recovery. Many of the supply chain challenges seen today were already occurring prior to the COVID-19 pandemic but are now magnified due to our historic cargo volumes. The industry must continue to develop immediate and long-term solutions, such as digitizing information, improved collaboration, and strengthening freight policies for seaports across the country. Most importantly, stakeholders need to realize that there is no longer an “off-peak” period for global shipping. Ports in Asia have operated 24/7 for years. Consumers place orders around the clock with a single click and expect delivery within days or overnight. The transition won’t be fast or easy, but the national supply chain must collectively commit to working 24/7 to improve freight movement and reduce delays at the nation’s ports.

The COVID-19 pandemic has caused significant disruptions in the global supply chain, and its recovery will depend on important factors such as outbreaks of new COVID-19 variants, vaccination rates, supply chain stability, introduction of zero-carbon container ships to the fleet, container box shortages, evolution of the energy crunch, and economic recovery. All of these will be decisive for shipping lines and their strategies to order new vessels, while optimizing current fleet capacity. Container shipping is entering a new cycle in which the catalyst for successful performance will be collaborative optimization between all parties in the supply chain to avoid inefficiencies and make proper investments to add capacity. The biggest challenge in the short term is managing demand in the new reality of changing consumer patterns, with a focus on sustainability, following the urgent call from the industry to decarbonize shipping in a highly volatile environment. The Panama Canal demonstrated its resilience through the COVID-19 pandemic, prioritizing our workforce and customers, while implementing health, operational, and financial measures to maintain uninterrupted service and flow of global seaborne trade. In addition, by offering the shortest route between Asia and the US East Coast, the waterway helps in global efforts to reduce greenhouse gases emissions from the maritime industry. The deployment of larger vessels has been accelerated by COVID-19 and the effects of climate change have become more evident. The Panama Canal has committed to becoming carbon-neutral in its operations by 2030, as it continues to offer a safe, efficient, and reliable service.

Labor, labor, labor. Everyone needs more labor. No one foresaw that in addition to the tragic impact on public health and safety, the impact of the COVID-19 pandemic on the supply chain would be like throwing gasoline on a smoldering fire. The need for blue-collar workers, already stretched to the limit, went beyond the breaking point as stimulus money fueled spending on hard goods, rather than travel and leisure, overwhelming many US gateways. While the ill-informed see ports as the bottlenecks, those in the know realize it’s the upland distribution network’s inability to handle the avalanche of cargo that is causing congestion. Fortunately, although not without its challenges, the Port of New York and New Jersey has not suffered a supply chain meltdown like those seen in other gateways. This was no accident. The longshore workforce in New York–New Jersey has worked tirelessly around the clock to keep the port fluid, and employers are in the process of adding several hundred more longshore workers to bolster the workforce. Since 2014, New York–New Jersey port stakeholders have collectively identified and, where possible, tackled supply chain challenges in the gateway through the Council on Port Performance (CPP). From the very beginning of the pandemic, when protocols for health and safety were the focus, to later as the volume ramped up, the CPP met regularly to try to head off problems before they became insurmountable. The CPP has also worked closely with local communities and institutions of higher learning to develop curriculum and prepare youngsters in the local communities for careers in the supply chain. The workforce development initiative is the key to future success. The challenge is that the future arrived much more quickly than anyone calculated.

The biggest challenge facing container shipping in 2022 is a lack of technology across the global supply chain. A lack of cargo visibility and supply chain integration and the resulting inability to anticipate and alleviate problems are challenges that technology can ease. Global supply chains are complex, with many handoffs, and will always have an inherent risk of disruption from unexpected events like the COVID-19 pandemic. The pandemic accelerated and magnified the challenges that already existed in supply chains. For example, a single container can require up to 100 physical document exchanges per trip, adding 20 percent to shipping costs. Digitalizing these interactions on a platform like Trade-Lens where they can be more easily processed will ensure that goods move more effectively through customs checks and across borders, comply with trade regulations, offer better cargo visibility, support business continuity, and improve cash flow for companies. By digitalizing and integrating data on an industry-neutral platform like TradeLens, the industry can face tomorrow’s challenges and better connect and simplify the world’s supply chains.

In 2021, the electronics manufacturing services sector went all-in on resilient supply chains. In manufacturing, there is always a fear of unscheduled downtime, which brings a line down. Global shipping is a machine, and the COVID-19 pandemic was the unscheduled downtime. With downtime you may plug a leak or replace a part, but underlying problems are usually lurking. Following one problem will lead to and point out multiple problems. COVID-19 was a catalyst that spearheaded the discovery of multiple problems in the global shipping machine. Shippers and transportation providers continue to be exhausted and humbled by all the disruptions. As supply chain fatigue sets in, what were once considered major problems now seem like bumps along the road. While chasing a balance between consistency and price, shippers and their carrier partners must focus on agility. Service providers and customers must be willing to make decisions quickly and stick to them.

From port congestion and tight truck capacity to labor and equipment challenges, protecting supply chain reliability has become a global priority. Logistics details that were once confined to the transportation industry now dominate mainstream media headlines. With the disruption at crisis levels, there is opportunity in all of this chaos: a chance to fully utilize all of the United States’ national assets — including uncongested ports, warehousing, and rail networks — to smooth out and future-proof the supply chain. The paradigm shift has already started. Shippers and ocean carriers are taking a closer look at transportation networks located near population centers with the infrastructure and capabilities to get cargo where it needs to go. Routing vessels to an uncongested port, for example, solves two problems. First, the cargo moves more efficiently because it’s not stuck in an endless queue. Second, you relieve some of the burden from the congested ports those vessels would have called. But it doesn’t end with the port routing decisions. Investments in the nation’s rail infrastructure could provide ample opportunity to utilize currently underutilized rail connections without sacrificing efficiency. On the warehousing side, shippers can turn to third-party logistics providers in seaport cities with the capacity and strategic location to efficiently get cargo to end users throughout the region. Supply chain disruption isn’t going away, even in a post-COVID-19 world. International cargo volumes will continue to grow, and e-commerce — and consumer expectations for near-immediate delivery — continue to create challenges and opportunities throughout the supply chain. Now is the time to start the conversation about fully utilizing US transportation assets to provide strategic and long-term solutions that will make the supply chain more resilient for all stakeholders.

Recent discussions on how to effectively expand Southern California port operating hours and improve gate transaction velocity are indeed meaningful and constructive. However, advances to one component in the supply chain will not remedy the fundamental challenges that are distressing the entire system. Short of undertaking an approach that similarly bolsters all infrastructure deficiencies, congestion will persist at random chokepoints. At the same time, capacity planning should not be founded on extraordinary circumstances. An effectual logistics network capable of meeting the demand of predictable ebb and flow that is firing on all cylinders from ship to shelf both technologically and tangibly is always essential. Only in this way can unexpected challenges be most efficiently met with optimal capability. Correspondingly, the lack of a sufficient workforce in all distribution network sectors has been a growing problem for some time, a problem that has only been emphasized by the influence of COVID-19. Appropriate time and consideration should be given to developing comprehensive incentives that will entice qualified individuals to consider these essential occupations. Volume is the fundamental issue. The unprecedented surge cascading through and overwhelming the supply chain exacerbated by a seeming shift that removes just-in-time supply from the quantity-on-hand equation has taken all stakeholders beyond the brink despite the best efforts of all parties. The World Trade Organization (WTO) forecasts international trade will grow 4.7 percent in 2022, but key questions remain, making predictions on how long the surge will last challenging. If consumer spending and lifestyle changes keeping volume elevated are lasting, the uncertainty is how scalable infrastructure solutions will need to be. The expansions required aren’t easily projected or accomplished. Considerable investment and retooling proposals will take time and must be proven sustainable in the long term. No logistics network stakeholder can resolve these issues single-handedly. Transparent cooperation to identify stresses and develop feasible solutions should be the industry’s unified 2022 objective.

Throughout the COVID-19 pandemic, longshore labor has stepped up to keep cargo moving so ports could stay open to handle the record consumption demand of US consumers. These heroes played a critical role in keeping the economy growing, and they deserve admiration and thanks, especially since they continued to work when there were no vaccines available. Port terminals and longshore workers came together to work for the common good of the nation, and not just as employers and union members. Entering 2022, the biggest challenge facing the freight transportation industry remains siloed supply chains. Shipping is a repeat business, and everything works in cycles through the supply chain from factory origin to ship to truck or train. The industry needs to pivot to operationally look at the supply chain at a higher performance level. For example, when a container ship departs late from Asia to the US, it triggers 14,000 TEU of smaller cycles that impact the supply chain. These cycles have an exponential cascading effect. The solution is to have better data, so that port operators, truckers, warehouse leaders, and rail operators can plan their resources two to three weeks out from events like this. This would also enable warehouse operators and drayage providers to optimize empty container returns and maximize dual transactions, in which an empty container is dropped off at the port and a full import load is picked up in the same trip. This holistic approach would clearly make supply chains flow more efficiently through better visibility. This approach is also at the heart of Maersk’s supply chain integrator strategy and TradeLens, the industry-neutral supply chain information sharing platform developed jointly by IBM and Maersk subsidiary GTD Solution.

In 2022, the largest container carriers will continue to lessen their dependence on pure ocean transport and spread their wings to cover more of the end-to-end supply chain. If container shipping remains a seller’s market, lines will have the opportunity to cherry-pick their customers. This will allow them to optimize the use of their assets and, ultimately, optimize their earnings. Most shippers will be looking to ensure stability and predictability in their supply chain, rather than optimizing costs. Relationships with transportation and materials suppliers will become even more important, and supply chain resilience will be top of mind. Companies will look to multi-sourcing and, to some extent, nearshoring to try to offset some of the risk businesses have been exposed to over the past 18 months.

Trouble in the global supply chain, which relies heavily on the container shipping sector, is likely to continue throughout 2022 in light of the resurgence and spread of more contagious COVID-19 variants. Port congestion in Asia was like “whack-a-mole” last year, as key hub ports suddenly closed due to worker infection. The ripple effects of the congestion flow right through to schedule reliability as ships queue up to be berthed. Global capacity as a result could be cut by 15 to 25 percent in some trade lanes, or in some reports an aggregate of 12.5 percent slashed. Such chaos can only be relieved when the shore side is able to fully let off goods that flood major seaports, which are apparently overloaded with current designed capacity. Ship’s crew change has also become an adverse factor adding to uncertainty of schedule reliability. Multinational crews make this issue even more difficult to manage, since quarantine requirements differ from one port to another. Ships often need to detour to complete crew changes, which means extra time is consumed, and it seems inevitable that they will continue to do so until worries about COVID-19 infections are dissipated from our daily life. As the industry’s orderbook-to-fleet ratio continues to rise, concerns about oversupply from 2023 onward will be reignited. However, the industry can anticipate that the International Maritime Organization’s EEXI/EEDI regulation, which goes into effect in 2023, will leave the industry without much choice but to delete old tonnage that would have been phased out during 2020–21 but continued sailing due to strong demand and record-high container freight rates. The comparatively higher level of scrapping activity from 2022 on should offset the orderbook substantially and minimize anxieties about overcapacity from newbuild deliveries.

Clearly, 2022 will be a decisive year for multipurpose (MPP) and breakbulk shipping. The foreseeable lack of newbuildings and a steadily aging fleet are starting to cause a reduction in available tonnage space, which is being accelerated by the recent developments in the container and bulk markets. The positive effect of this development is that, after years of poor income, vessel owners are now earning enough to cover the inevitable investments needed for fleet modernization and renewal. On the other hand, shippers are facing severe price increases, in most cases far above the transportation budgets calculated in weaker markets. The next few months will be characterized by whether or not this niche market is willing and able to balance the trade-off between the income required to ensure sufficient fleet supply for the future and the risk of failing projects and shippers due to the significant increases in freight rates. Some of these projects are crucial for all of humanity, since they are related to green energy and emission reductions. Can the world afford to see wind power projects being postponed or canceled due to a lack of cargo space or due to becoming unprofitable? Is this situation finally increasing awareness about how important MPP shipping is for distributing the technology required to solve issues that affect everyone? The world needs a solid and reliable MPP shipping market with a healthy balance of supply and demand, a fleet that can deliver the cargoes the world needs without harming the environment too much, and rate levels that are rewarding for all stakeholders in the value chain. This is indeed a utopia, but the coming months will give us all a lesson about how this could look, as long as all the stakeholders act wisely and reasonably.

US ports are handling unprecedented levels of retail and furniture imports as the COVID-19 pandemic continues to drive consumers’ buying habits. This great influx of cargo has shown the world the importance of a fluid supply chain and spotlighted issues in the supply chain that must be addressed. For starters, the US needs significantly more distribution center capacity to handle the flow of goods. Ports need to be a player in assuring that exists. SC Ports works with retailers to support the development of near-port transloading facilities and import distribution centers (DCs), such as Walmart’s nearly 3-million-square-foot DC, set to move goods through the Port of Charleston starting in early 2022. The sustained, record-breaking cargo levels also highlight how critical both chassis and trucking capacity are to keeping supply chains fluid. SC Ports is preparing to launch its own chassis pool in early 2023 to improve the safety, reliability, and availability of equipment for shipping lines, motor carriers, and cargo owners. To help solve the trucking capacity and labor shortage, it will also be critical to create a workforce pipeline and pay drivers well. Running a port is an infrastructure business. This has always been true, but never more so than during this unbelievable period of growth and supply chain challenges. Capacity is the new port currency. SC Ports has invested more than $2 billion in recent years to enhance existing infrastructure — including modernizing Wando Welch Terminal and expanding rail-served Inland Port Greer — and by opening a new container terminal, the Hugh K. Leatherman Terminal. With the opening of the $1 billion Phase One of Leatherman Terminal in March 2021, SC Ports became the only port in the country with new terminal capacity. Phase One adds 700,000 TEU of annual capacity to the Port of Charleston when it is most needed on the East Coast; full buildout will yield 2.4 million TEU of capacity. Ports must plan for and strategically invest in infrastructure, as cargo will continue to route to those gateways offering capacity, efficiency, and fluidity. The authority’s strategy of planning infrastructure to accommodate growth will lead to continued success at SC Ports as shippers diversify their port gateways.

Sealand has learned a tremendous amount from the last two years, which have both reshaped the company and reinforced its objectives. Foremost, we are very proud of how our colleagues have demonstrated their strength, resilience, and agility. Our way of working has “changed for good” — i.e., both for the foreseeable future and for the better. While the industry looks forward to one day resuming face-to-face interactions, logistics providers will continue to rely on virtual interactions. The ability to work from anywhere is something that employees value and, when balanced with face-to-face strategic and culture-building initiatives, will provide a better experience for staff and, in turn, for customers as well. The industry also learned it needs greater resilience throughout the global supply chain. Transportation providers must invest in the digital and physical solutions necessary to handle shocks to the system, as well as new opportunities for shipper customers that arise in their business. There will still be headwinds in future, and we must provide greater visibility and actionability for the unexpected challenges that will impact global logistics supply chains. Some of these challenges and headwinds may well come from environmental initiatives. The latest scientific assessments leave no doubt that the world must embark on an all-encompassing transformation away from reliance on fossil fuels. The logistics industry is an important contributor to global emissions and must eliminate emissions from the supply chain to eliminate the risk of climate change. Sealand is proud to be part of Maersk, and that the group has made decarbonization a strategic imperative for the company and the industry at large. Ultimately, through the pandemic we are reminded that our customers are all individuals and are all part of communities, individuals and communities that have ups and downs like anyone else, and whose logistics needs and goals we are uniquely positioned to support as a true partner.

Global trade surged in the first half of 2021, lifting global volumes above their pre-pandemic peak, and this trend is expected to continue into 2022. The container sector has experienced a remarkable recovery, but unfortunately, supply chain disruption remains a risk as a result of challenges brought on by the COVID-19 pandemic, outbreaks in Asia, and port congestion. The maritime shipping environment is a complex network; the key factors in the current supply chain landscape are challenging to address. Marine terminals are at the epicenter of the industry, but viable, sustainable solutions can only be deployed if stakeholders — terminal operators, carriers, railroads, truckers, retailers, distribution centers, logistics service providers, labor partners, chassis managers, as well as government stakeholders — take action as a collective group to remove bottlenecks. In an ever-changing, uncertain time, service providers must find opportunities to pivot quickly and efficiently. The diversification of port gateways, for example, has the potential to ease congestion at major ports. Several underutilized secondary ports are capable and prepared to provide efficient cargo handling and help alleviate bottlenecks. US transportation infrastructure will need to keep up with demand pressures, including ports. The current challenges in the supply chain have only emphasized this reality. Funding at the federal, state, and local levels is of the utmost importance to deliver long-term benefits to cargo movement and contribute to a resilient infrastructure network. As always, the industry must continue to prioritize safety, making a zero-harm mentality a fundamental value throughout the supply chain.

The past two years have spotlighted the vulnerability and unreliability of global supply chains. The greatest challenge facing the container shipping industry is finding creative ways to serve accelerating growth in global trade. Beneficial cargo owners and ocean carriers realize the congestion plaguing the larger traditional established ports and inland routings means new solutions are needed. Emerging ports are proving to be reliable alternatives, especially those that have stayed ahead of the curve with robust terminal capacity expansion plans, have plenty of land to accommodate growth, and offer smooth inland connections. Companies are looking for the best locations to establish new distribution centers, and some manufacturers are choosing these new port gateways, which are also closer to expanding markets. Savvy retailers are reconfiguring their distribution strategies in growing markets like Central Florida to handle more imports at existing distribution centers (DCs) and capitalize on new efficiencies. Importers and manufacturers are seeing considerable savings in drayage costs, as well as environmental benefits, including fewer truck miles, lower emissions, and less idling time, because emerging ports are closer to expanding markets. Port Tampa Bay is building on record growth in our container business, fueled by rapidly expanding distribution center capacity along the Interstate 4 corridor between Tampa Bay and Orlando, Florida’s distribution hub. Companies in this region enjoy significant savings in their supply chain distribution costs, as truckers can make as many as four round-trip deliveries per day from the port to area DCs, which service all of Florida and reach into markets throughout the Southeast and beyond. To keep pace with this rapid growth, the port has been expanding terminal capacity with additional paved storage, extended berths, and new cranes, equipment, and transloading facilities. Now more than ever is a great time for shippers to “reroute” their thinking.

The COVID-19 pandemic was the industry’s “black swan” moment, and it brought the world an understanding of both the fragility and importance of the supply chain. In that moment, the Port of Virginia committed to focusing on those things within its control: maintaining port fluidity, overall safety, continuous communication, collaboration, taking advantage of down time, and planning for the rebound. As the pandemic began driving down volumes, we focused on the moment while implementing our continuity of operations plan and preparing for the future. Pandemic or not, it was important that we did not alter our forward trajectory or change the way we do business. Regardless of the decline in volume, maintaining operational efficiency remained a priority. The port continued its capital investment strategy and used the time to better understand the capabilities of the port’s two primary container terminals, which had recently completed an $800 million modernization project. Each year, the port authority brings people from across the organization and stakeholders in the Norfolk Harbor together and throws a “black swan” scenario at them — a cyberattack, a collision in the ship channel, a direct hit by a hurricane, or another highly disruptive event to operations. The goal is to better understand what we do well, identify the areas needing improvement, and drive collaboration among those around the table. The practice is taken seriously, often resulting in the development of processes for responding and resuming operations during a disruption. Those efforts have proven invaluable during the pandemic. No one was “ready” for the onset of a pandemic and its long-term disruption to the freight transportation industry. The moment taught us the value of practice and preparedness. Panic is not an option, and maintaining focus in the most difficult moments holds value for all supply chain stakeholders.

First, hooray for us! Supply chain professionals have readjusted and reengineered, and although the logistics industry is facing great difficulties, we are getting the job done. News organizations have significantly increased their coverage of industry; hopefully this will continue beyond the current crisis. Regular attention is long overdue, given the importance of the supply chain to the US economy. Clearly, the whole world has learned from the COVID-19 pandemic and related consumer spending and e-retailing that traditional international supply chains were fatally flawed in that they lacked robust backup features. They relied too extensively on one or two ports, or on a small number of trucking companies or warehouse providers. Shippers need to utilize secondary suppliers on a regular basis to keep those networks active and effective. Major ports have not been able to handle the flood of cargo. Why should one or two municipalities bear the brunt of all the containers and the attendant congestion? On the East Coast, there is a container port roughly every 150 miles, and shippers are beginning to realize they will need to utilize more alternatives going forward. Warehouse operations — both proprietary and third-party — need to extend their hours. Truckers will need greater flexibility in their operations. Class I railroads need to provide more frequent service to additional nodes in their networks. Ports have already instituted extra gate hours, established satellite container yards, purchased additional equipment, and cooperated more closely with stakeholders. But alternatives are the key. Every complex system needs redundancy, and every shipper should regularly reevaluate its supply chains. The “just-in-time” inventory model is dead, while the “just in case” model is alive and well and doing overtime on our laptops and mobile devices. Shippers shouldn’t put all their eggs in one basket. This is an obvious lesson, but the COVID-19 pandemic really drove it home. Although labor constraints and government policies contributed to the crisis, the lack of alternatives has been a major contributor to the current supply chain difficulties.

The COVID-19 pandemic revealed how vulnerable the global supply chain is to demand surges and disruptions. Though record volumes are flowing through the ports, the lack of coordination among segments of the supply chain and inefficient use of infrastructure capacity have created choke points and price distortions. Early in the pandemic, the Port of Oakland experienced a temporary shortage of longshore workers due to the sudden surge of volume. The International Longshore and Warehouse Union (ILWU) and Pacific Maritime Association (PMA) agreed a larger labor pool was needed to move more cargo. Hundreds of workers were trained to fill skilled positions, and the port now has sufficient labor to handle more ships. And yet, some shipping lines began to skip Oakland in their customary Los Angeles/Long Beach–Oakland–Asia rotations to accelerate their ships’ return to Asia to maximize cargo imports. This resulted in a reduction in volume and capacity to spare in Oakland right before the holiday season. Though direct sailings to Oakland have begun and some rotational services have been restored, many cargo owners that regularly move cargo through the port had to scramble and pay unreasonably high prices to haul containers to and from Southern California. More importantly, agricultural exports — a vital part of US international trade — have lost revenue and market share due to lack of service and shipping costs that were distorted by the import surge. To achieve resiliency, the supply chain needs state and national freight policies that provide, incentivize, and mandate where appropriate investment in trade corridor and port infrastructure, investment in clean energy and high-efficiency equipment, workforce development, transparency of information and coordination among freight segments, optimal usage of port capacity to minimize congestion at highly impacted ports, and exporter access to shipping services at reasonable prices that are not distorted by import surges.

Shippers must explore alternatives to traditional transit routes to move cargo into and through North America to avoid further disruptions in the supply chain. The US logistics system as we know it is not capable of handling the recent surge of imports, nor the disturbances that may be on the horizon. Dependence on specific, already-overloaded ports, railroads, and roadways is a systemic problem that needs to be addressed, because this is not the last time this issue is going to be front and center. The Panama and Suez canals, for example, are open for business and provide alternative routes to less congested ports on the East Coast that have available capacity and room to grow. To thrive, the industry needs to rebuild the supply chain workforce by encouraging vocational skills in trucking and cargo handling. Federal, state, and local governments must work together and commit to investing in strong capital programs that build or improve connections to our seaports and major distribution centers. An increase in production of goods in the United States would be ideal, but shifting production from Asia to Latin America could also reduce supply chain issues. Florida has made — and continues to make — major investments in transportation infrastructure connecting its seaports to highways and railroads that can move cargo from the state’s southernmost limits to inland markets in the middle of the country. At Port Everglades, the Florida Department of Transportation has invested in three new super post-Panamax gantry cranes and a historic project to add new container berths by the end of 2022. The state has also committed significant funding to deepen and widen the ports’ navigation channels to allow for larger container ships. The past two years have taught us that shippers and supply chain enterprises must have a Plan B for congestion along traditional routes. Establishing partnerships now will pay great dividends in the future.

Container business is one of the smallest segments in Port Canaveral’s cargo portfolio. Bulk and breakbulk materials, such as lumber and slag, make up the largest portion of the port’s cargo throughput. Volumes of these raw materials moving through the port have increased over the past year to meet the demand of the fast-growing Central Florida commercial and residential construction boom, with increased roadway, highway, and bridge construction throughout the state. The diversity of cargo at Port Canaveral requires our ability to maximize berth and uplands suitability and availability for offloading and storage. During the pandemic, Port Canaveral lost 80 percent of its operating revenue as a result of the cruise industry shutdown. The port was forced to put all capital improvement expenditures on hold and use funds previously reserved for those projects to cover operating expenses. With the return of cruising at Port Canaveral and very positive FY2022 cruise revenue outlook, the port is reviving its capital improvement plan. An estimated $48 million will be invested in rehabilitating North Cargo Pier 3, a functionally obsolete berth not in use since 2014. The project, which will replace the current outdated pier design with modern marine facilities that can accommodate larger deep draft vessels, is expected to be complete by spring 2023.