The ocean freight rates announced by the Shanghai Shipping Exchange for North America are US$6,000 per 40 foot from Shanghai to Los Angeles and over US$10,000 per 40 foot to New York on the East Coast.
This is more than four times the price before the pandemic started. And usually the peak season for Christmas sales for North America starts in September, however, this year it has been moved up to August.
This year’s Christmas shopping season in North America is different from previous years. Walmart, the world’s largest retailer in the United States, announced that they will hold Black Friday sales three times in November. The Black Friday sales are held every year on the fourth Thursday of November, Friday after Thanksgiving Day, which is one of the most vibrant sales in the United States.
The sales will be held in three separate days this year to avoid congestion due to the Delta variant. Since Walmart will have these sales, it is expected that other retailers will also increase or extend the sales period in some way.
Initially, analysts thought the growth in demand for North America was due to the recovery of the United States economy from the Biden’s administration’s benefits, and demand from stay-home workers.
However, there was a stimulus from the retail side, that gave further momentum to the Christmas shopping season. Under these situations, each retailer needs to secure inventory, which increases orders and international transportation than usual.
As a result, many containers are now gathered in China, and is very difficult for countries in Asia like Japan and Thailand to get containers and space for North America. The transportation for Christmas shopping season usually settles down before the National Day of China on 1st October.
However, even after the National Day of China, there may be some orders that are not able to be sent due to lack of space. And it is said that there are about 40 ships waiting offshore at Los Angeles port at the moment. This means that there are 40 container ships loaded with cargo waiting to be loaded or unloaded.
Furthermore, even if the container traffic out of China settles down in October, it will take time at the United States side to handle it. Currently, not only the ocean transportation, but also the inland railroad is at its breaking point.
It is sort of continued stagnation across North America, so it will take several months to resolve. In addition, the next peak is the Chinese New Year in February 2022. In general, cargo shipments will be concentrated again before the Chinese New Year.
If the stagnation has not been cleared by then, there will be another disruption in the supply chain for North America. The next event after that is on July 2022, the expiration of the North American West Coast Port Labor Agreement and the revise negotiation. The previous revision of the collective agreement in 2014, took a whopping nine months to reach a conclusion.
During this period of negotiations, the port actually became less functional, so much so that cargo had to be shipped by Air, and then via West Coast of Canada and East Coast of North America. One of the themes of this collective agreement is “port automation.” If the automation of ports is introduced, the work of dockers will be reduced.
In that sense, we can expect that this revise negotiation will be rough and time consuming. Since ocean freight rates to the East Coast of North America soared last time, it is likely that it will be so in July 2022 as well.
Meanwhile, in September 2022, the transportation for Christmas shopping season will begin. We don’t know what the influence of Corona will be at this time next year, but there is a possibility that the function of the west coast ports of North America is not properly functional.
If another variant strain of corona affect us, we can expect further disruption. There may not be an accident like the Suez Canal blockade of this year, but the situation will continue to be tense, enough to disrupt the supply chain if any problem occurs.
In conclusion, ocean freight rates will continue to rise throughout 2022, and there are few factors that will cause them to fall. In Japan, in particular, forwarders and shipping companies have already started negotiating on ocean freight rates and space for 2022.
Normally, these negotiations are held in November or December. However, it started in September this year which is an unusually early start. In these negotiations, it seems that the focus is not so much on freight rates but on the stable supply of space.
