CONTAINER QUARTERLY: Shippers look to USEC gateways amid USWC congestion, uncertainty

Shippers importing goods into the United States from Asia have been allotting more cargos to the US East and Gulf coasts in an effort to avoid congestion and diversify their risk ahead of potential industrial action at USWC ports, sources said.

The shift comes as many North American ports continue to grapple with vessel lineups and congested terminals, unable to efficiently move containers due to inland logistical constraints.

Vessel queues outside of the Ports of Los Angeles/Long Beach peaked in January at 109, and have since fallen to just 33 vessels on April 4. Vessel wait times remain unpredictable, sliding from 10 to 40 days depending on terminal availability.

"We're seeing things improve in SoCal, but we've also seen business efforts made to dampen Southern California volumes," a US-based carrier source said. "We wouldn't be surprised if it's a lull, and that congestion seems to be coming back."

The diversion of disports from the USWC has increased congestion at USEC and USGC ports, as increased vessel traffic has pressured operations at container gateways and inland infrastructure.

The Port of Charleston had 14 vessels at anchor or adrift waiting for a berth on April 6, Platts cFlow trade-flow analytics software showed, down from a high of nearly 30 vessels in mid March. Vessel waiting times at the port remained between 10 and 16 days.

The port of Virginia in Norfolk similarly had 13 ships waiting for berth, while the Houston backlog tallied 12.

Global congestion levels did ease during the first quarter of the year, according to an April 5 report by maritime researcher Sea-Intelligence, which indicated global capacity taken off-market by congestion fell 2.1 percentage points to 11.6% in February.

"The terminal congestion index saw a gradual improvement over the past two months in North America, but the index is still at an elevated level," said Sea-Intelligence CEO Alan Murphy. "We see the same trend for the intermodal congestion."

Much of the improvement at Southern California ports has been chalked up to seasonal demand declines, compounded by factory shutdowns brought on by fresh coronavirus lockdowns in many North Asian origin cities.

The demand for Asian cargoes is likely to rebound as and when the market turns towards the peak season, which historically begins in July. Some sources report that order projections are already well above past years, while carrier sources note strong volume projections for May onwards. This means that an early start to the peak import rush in the US could be on the way.

"[We're going to] pivot to peak season early," said one US freight forwarder. "Summer and back-to-school supplies are already here. That to me is an indicator of what's going to happen with bookings."

Labor talks on horizon

Shippers have shuffled volumes away from the congested US West Coast to the US Gulf and East Coast ports on both spot and long-term bases, as upcoming International Longshoremen's and Warehousemen's Union contract negotiations are expected to be tempestuous.

Contract discussions are scheduled to begin on May 12, while the current contract is set to expire on July 1.

"The potential is high for a work stoppage," said Julie Gerdeman, CEO of Everstream Analytics. "Shippers can divert to USEC, divert to smaller ports, and other modalities."

Three of the last four negotiations between the union and its employers resulted in temporary work stoppage before a deal could be struck.

"People that didn't have USEC distribution center presence are now asking for USEC rates," said another carrier source. "Easy to hide behind congestion on USWC, but in reality, it's hedging on what could happen on ILWU discussions."

North American rates decouple

Container rates into the US East Coast and West Coast have further decoupled in early April as divergent market forces keep the spot market on edge.

Platts Container Rate 5 -- North Asia-to-East Coast North America -- was assessed at $12,000/FEU April 5, after gaining $1,000/FEU against the month, supported in large part by growing demand for all-water USEC services and port congestion at key gateways such as Charleston, Norfolk, and on the Gulf Coast, Houston.

At the same time, PCR13 -- North Asia-to-West Coast North America -- lost $1,300/FEU on the month as demand had yet to return to pre-Lunar New Year heights, while sentiment remained poor that Asian output would improve materially in the first weeks of Q2.

The spread between PCR5 and PCR13 reached $4,000/FEU in early April, an all-time high for the assessments launched in July 2017.

Since its launch, the differential has averaged $1,077/FEU, but it began to widen during the fourth quarter of 2021 and has grown for four consecutive months, increasing by $2,600/FEU since the start of 2022.

The Platts Container Index -- a weighted average of Platts' key container rate assessments -- has trended largely downwards since the beginning of the first quarter, brought on by significant rate erosion in the Asia-Europe market.

The index was down 12% from the start of the year at $6,293.56/FEU on April 5 but showed significant growth against the same day in 2021, when it was assessed at $4,487.41/FEU.