Jason Haith, Sales Manager for OEC Group’s Louisville office, shares his view of some of the industry’s most recent consequential developments.
What are shippers inquiring about in the market as it is right now?
Shippers are looking for assistance in getting their freight unstuck in different places around the country. Especially in October through the start of November, containers had been trapped for several months at West Coast gateways like LA, East Coast gateways like New York, Gulf Coast ports like Houston, and inland rail hubs like Dallas, Chicago, and St. Louis. Shippers are looking to leverage provider relationships and market knowledge to give themselves the best chance of solving this and other difficult problems.
How did all this volatility begin, especially since the West Coast ports are now experiencing minimal congestion?
While space is easier to secure, especially for larger logistics organizations with substantial buying power, ground stacking and rail terminal congestion has increased dramatically across rail lines in the US and at important transportation hubs in Canada including Vancouver, Toronto, and Montreal. Also, while it looks like port congestion has effectively cleared at major West Coast gateways ports like LA-Long Beach, in reality it was simply relocated to New York New Jersey, Houston, Savannah and other East and Gulf Coast ports. Those ports do not have the same infrastructure as the West Coast ports, contributing to severe inland back-ups. Also, all the containers that are sitting at West Coast ports still need to be moved, which is resulting in back-ups throughout the rail system, as well.
What impact have prolonged West Coast labor negotiations had on the market?
One extremely clear impact of these prolonged negotiations has been the marked shift by shippers to alternative gateway ports. New York-New Jersey overtook LA-Long Beach as the most popular US gateway, Gulf Coast ports have processed historic volumes relative to that region, and alternative gateways on the East Coast, like Savannah, have also processed similar amounts of freight relative to traditional averages. Also, the fact that these negotiations are still unresolved has introduced a significant degree of uncertainty. As a result, some shippers and logistics providers may not have sufficient experience to navigate these complexities and are unable to offer clients accurate strategies on how to proceed, which is negatively impacting the market. Fortunately, all of us at OEC have seen so many different types of market conditions over the years that we are able to help our clients successfully plan their supply chains – even when others are compounding the problems.
Do you think we’re any closer to a “normal” market?
Generally, when people refer to a normal market, they are talking about the market as it was pre-COVID about three years ago. To be more specific, I’d qualify a normal market as a market in which shippers can accurately predict both costs and transit times across the vast majority of trade lanes. Right now, most shippers can’t do that, and I expect that the overall field will continue struggling through, at least, Lunar New Year – possibly longer. While larger logistics providers with access to greater space allocations, more routing options, and more internal data on those routes (transit times, costs, etc.) may be able to predict more effectively during that span of time, there is no telling what will happen if these labor disputes erupt into organized action.
What advice would you give to shippers under these conditions?
Although it may be easier and less expensive to get space on some lanes right now, this likely will not be the case moving forward. Capacity is shrinking to better match current demand, and some uncertainty remains regarding labor relationships. Now is the proper time to reach out and work with your logistics advisor to create effective and predictable logistical strategies that can either minimize or negate the negative impacts of a volatile market.