The 2:00 Minute Warning

Thus far, the dominant transportation/ supply chain story for 2021 has been the turmoil in the ocean markets. Having said this, that is why it is interesting to talk with shippers who ask why they should be concerned about the ocean markets if they don’t have any freight moving via ocean carriers.

My answer to them is that just about every shipper is affected by what happens in the ocean markets since our supply chains are modally interconnected. What I mean by being modally interconnected is that what happens in the ocean markets affects every other mode of transportation (a.k.a. truckload, LTL, rail, intermodal, air, and yes, even parcel). And that is why shippers need to pay attention to the fact that the volume of containers being moved has continued to remain strong heading in to what is historically the August to October peak season for the ports.

How strong has the volume been? According to the U.S. DOT Bureau of Transportation Statistics report on port volumes, monthly TEUs have been on the rise since March 2020. Not only that, but the latest data also shows a major increase in volumes from pre-pandemic levels at the same point in the year in 2019 versus 2021 - 3.8 million TEUs in May 2019 versus 4.7 million TEUs in May 2021. That’s overall a 24% increase in volumes at a time when a number of factors spun from the pandemic are causing delays.

That’s why the Wall Street Journal reported on rising prices for ocean shipping last month in the article “Container Shipping Prices Skyrocket as Rush to Move Goods Picks Up”. While many shippers are facing even higher prices based on their profile and needs, they reported “The average price world-wide to ship a 40-foot container has more than quadrupled from a year ago, to $8,399 as of July 1, according to a global pricing index by London-based Drewry Shipping Consultants Ltd.” Here in August, shippers are now paying somewhere in the range of $15,000 - $25,000 in the spot market to get their containers moved.

With container volumes expected to get even higher as we enter peak season, we reached out to our friend and ocean expert Peter Tirschwell, VP of IHS Markit, to get his insights on what to expect in the ocean markets for the foreseeable future. Specifically, we asked him the questions we know many shippers have been asking about what’s driving the current conditions and what to expect as we head in to 2022.

Peter’s insights are sobering and will help you understand why conditions in the ocean markets may get even more challenging for shippers in 2022. That is why even if you are not an ocean shipper, what is happening in the ocean markets will affect your transportation area. So we strongly recommend that you listen to the interview. It will be well worth your time.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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