Global shipping snarls likely to last for some time

CUYAHOGA FALLS, Ohio—Global shipping and logistics challenges are not likely to go away anytime soon, according to a pair of executives in that sector.

Michael Jakobsen and Dan Fries spoke at the 2022 International Silicone Conference, hosted May 10-11 in Cuyahoga Falls by Rubber News. Jakobsen and Fries both are with DSV Air & Sea, a global freight hauler based in Denmark.

Global port congestion remains an issue, with 12 percent of global capacity effectively removed for several reasons, including COVID-19 shutdowns and lack of labor, said Jakobsen, a branch manager based in the Cleveland area.

"Twelve percent is a lot," he said. "That's the equivalent of 3 million containers."

The two major ports on the U.S. West Coast—Los Angeles and Long Beach, Calif.—are backed up to the point where ships approach the ports, then drift out because of a lack of anchoring spots, requiring them to approach again. Upcoming negotiations with the longshoremen's union there also could affect the situation.

"There was a delay the last time they negotiated, and we didn't have these other issues," Jakobsen said. "Now the shipping companies are printing money and the union will want to capitalize."

Reliability of shipping deliveries currently is between 13-30 percent, well below the historical average of 65 percent. Shipping delays globally are averaging between six days and 15 days. Fuel costs also have risen in recent months because of the Ukraine crisis.

The air freight market "hasn't been much better" than ocean freight, according to Fries, a general manager based in the Detroit area. DSV ranks as the world's third-largest air freight shipper.

Fries said DSV partly has avoided staffing issues at larger airports by using its own charter network of planes to fly into smaller areas. The firm's charter network handles 20 percent of its air shipments.

Although air supply is catching up with demand, Fries added that the situation has been complicated in recent months by the inability to fly over Russian airspace.

Overall, chemical shipments were up 21 percent last year because of high demand for COVID-19 test kits, with shipments of fashion goods up 18 percent. Fries said high technology and automotive shipments were up as well.

On the U.S. East Coast, some rail shipments can't double-stack containers because they need to go through tunnels, reducing the amount of freight that can be shipped.

Shipping firms now are charging between $15,000 and $20,000 per container, compared with the $3,000 they were getting before the pandemic. Current lead times from China to Chicago—from port to container yard—are 45 days, but Fries said that does not include the 4-6 weeks needed to schedule a shipment in advance.

"At the end of the day, we're trying to control an industry that depends on the ability to keep things moving," Fries said. "We feel the same pain you do."