Inland exporters’ fears of container shortages fade with surge of imports from Asia

The dramatic surge of imports coming into the U.S. by containers over the last two months have reduced inland exporters’ fears of container shortages at the coming harvest time – at least for now.

Specialty Soya and Grains Alliance (SSGA) Strategic Adviser for Trade & Transportation Bruce Abbe was quoted last week in a Journal of Commerce (JOC) story, “Container shortages fade before peak export season.”

The first six months of the tumultuous 2020 shipping year was marked by disruptions caused by more than 100 “blank sailings” of large container vessels that normally would call on U.S. ports. Ocean carriers canceled the sailings as they tried to manage over capacity during the global coronavirus pandemic economic slide.

However, consumer demand has shifted, particularly for personal protection equipment, and with the normal peak season for imports getting underway, import demand has risen off the charts. There were almost zero new canceled sailings in September, and the steamship lines returned some vessels on the trade lanes.

Import demand has continued to climb causing major congestion at the ports, notably Los Angeles and Long Beach, which dominate the E-commerce import and warehouse trade. The Class 1 railroads that bring containers to the large Midwest distribution population centers have also struggled with a sudden surge in demand after they had furloughed workers during the first six months.

Ocean carrier spot rates from Asia to the U.S. have shot up. JOC reported that the West Coast import spot rate increased to more than $3,700 per 40-foot-equivalent (FEU), up 140% from a year ago. The spot rate for imports to the East Coast jumped to more than $4,500 per FEU, up 72.5% from last year.

JOC also reported that there is a big shortage of containers in Asia for suppliers, and it is likely to intensify in the near future.

Export supply outlook
While the ocean carriers have proposed some modest export container general rate increases (GRIs), rates for shipping containers to customers in Asia have remained low. With an imbalance favoring exporters in the near future, it is expected that rates and supply should remain in our favor, Abbe noted.

He warned, however, that market conditions change rapidly in container shipping and international trade patterns that could quickly alter the dynamics for export shippers.

“The value of the dollar has dropped recently. That’s a huge factor (in making U.S. ag exports more competitive),” Abbe told JOC.

Demand in Asia for specialty soybeans and grain has remained strong throughout. If imports to the U.S. drop in the fourth quarter and first quarter of 2021, as is often the case, and we see a return to more blank sailings at the same time the U.S. will be harvesting a huge crop with more competitive prices, equipment shortages inland and supply chain disruptions could return.

“It looks good for now.  Let’s cross our fingers it continues,” Abbe said.