The past several months have been an incredibly challenging time for importers. Port congestion, excessive demand due to COVID-19, and equipment & labor shortages have continued to plague the industry. Is there any light at the end of the tunnel, at least in the short to medium term? Everyone wants to know will Imports normalize in 2021?
As of last week there were over 40 vessels anchored along west coast ports waiting to be birthed. It is the perfect storm of increased demand, decreased capacity, and labor shortages in the ports. Although the major issues are hitting the west coast the hardest (also where most volume goes during normal times) the east coast is not without issues. The Port of Savannah last week reported having over 10 vessels waiting to birth. Some shippers are opting for longer routes to bypass the west coast, but this will just lead to further congestion elsewhere.
Now that vaccinations are spreading rapidly across the United States, we are starting to see more states and cities further open and loosen regulations. While this is great for many reasons, it is expected to increase retail sales dramatically per the National Retail Federation. A tale as old as time — retail continues to be an incredibly heavy import reliant business. For an economy already facing depleted container counts this certainly won’t help the situation. This graph below is the Container Availability Index from late last year. We won’t bore you with the details but like most graphs the higher the line on the graph the better. You can clearly see there were more containers available in 2019 vs. 2020 and things haven’t improved in early 2021.
Will Imports Normalize the Remainder of 2021?
It is highly unlikely imports normalize to the levels that were seen in 2018 and early 2019 (good ‘ole days). Back then there was less demand, more capacity (more vessels, more blank sailings), and there were no COVID impacts to be concerned with. Fast forward to current times where we see increasing and often lumpy demand, labor productivity issues (due to COVID and ongoing union battles), and less sailings available. It should be noted that simply adding sailing capacity will not fix the problem. There are structural issues that need addressed first. All pieces need to be whistling to have a successful import model. The importer needs to be able to reliably find and confirm bookings. Vessels need to move on schedule. Dock operations need have enough equipment and available, productive labor to keep up with the volume. All of these are falling woefully short at the moment.
Unfortunately, these times are the perfect cocktail for a disaster recipe. The container import model is a very volatile industry in general. It goes in year waves and typically follows the supply & demand rules of economics. Though it behooves all parties to balance supply & demand the import history is full of a lot of mismatch between supply and demand. When you throw in all the aforementioned factors in our current times it points to a lot of rough sailing ahead the remainder of 2021. What are your plans for the remainder of the year? Lessgistics, a trusted third party logistics company, would love to discuss your supply chain needs.