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ITS Logistics

Will European Port Strikes Cause a Supply Chain Bottleneck?

A busy port and a vessel being loaded with containers

European port strikes increase US port congestion

United States and European ports are waiting for tens of billions of dollars in trade anchored at sea as congestion continues to build. Around $30 billion is on vessels anchored off the east and west coasts, with a similar situation in Europe. Labor shortages paired with strikes at the German and Netherland ports are exacerbating the pile-up of export containers bound for the U.S.

According to bills of lading from ImportGenius, many of the export items from Germany are critical components for automobiles, lithium batteries, auto parts, and chassis. Listed in recent U.S. Customs filings were Mercedes, BMW, and Ford, along with home décor, flooring, and furniture from Ikea. Of the Germany’s exports, 15.4% is motor vehicles/auto parts, 14.2% is machinery, and 10% is chemical products. The congestion from the ports is spreading quickly to other major ports in Europe. Sources indicate that even with no additional labor strikes, the current situation would remain chaotic for at least the next three months.

Negotiations continuing as dockworkers strike

Germany, Europe’s largest economy, is facing inflation at a skyrocketing rate due to Russia’s war on Ukraine. Affecting everything from food to energy, workers at the ports are calling for wage increases to match rising inflation. The United Services Union (Ver.di) represents 500,000 seaport workers in conjunction with the ITF and ETF dockworkers’ union. Ver.di reported in June that negotiations with the Association of German Seaport Companies (ZDS) had failed. The next morning, several thousand employees in the seaports of Emden, Bremerhaven, Bremen, Brake, Wilhelmshaven, and Hamburg held a 24-hour warning strike. The strike came shortly after the congestion at the Port of Bremerhaven reached a critical level, with the ports of Rotterdam, Hamburg, and Antwerp also under immense strain.

A third warning strike lasting 48-hours on July 14 caused an extreme amount of aggravation at Hamburg’s container terminals, where yard density already stood at 90%. Ships continue to idle with berthing delays up to 14 days even before the stoppage. Increased berthing delays and slow ship working on congested quays will likely result in more blanked sailings from Asia in August and September as shippers suffer delays in the supply chain.

The situation in Hamburg has worsened with close to 200,000 TEUs waiting for a berth, indicating higher waiting times in the coming weeks. Containers are not easily available at the terminals and inland depots, making it difficult for shipping lines to move empties back to Asia. In turn, this will worsen the export situation in Asia with the lack of empty containers to be filled. Importers in Europe may expect delays on their Christmas orders, with European trade being delayed in the U.S. as well.

Global port pressure and delay

Growing port congestion in both Europe and the United States are not the only hiccup in logistical planning. Unfortunately, moving containers from the hinterland or at the ports also presents a problem due to rail congestion and labor shortages. The rails are clogged, and shippers cannot bring any containers into the ports of Hamburg and Bremerhaven ahead of time. Instead, they must wait seven days prior to departure and even that does not automatically mean it will load on the vessel because of rail capacity. Because congestion has also shrunk the availability of containers, the perceived lack can push up rates which are passed to the consumer and add to inflation.

Ocean carriers are examining their options and depending upon stowage of ships and rotation of fleets to defer calls at Hamburg, Bremerhaven, and Wilhelmshaven. Carriers may overland some German cargo at Gdansk, Zeebrugge, or Felixstowe for later relay operations. Rotterdam and Antwerp are already heavily congested and would likely refuse to allow discharge of German imports for transhipment.

The rate of canceled or blanked sailings being announced by ocean carriers is a factor to watch in the coming weeks. Sailings are traditionally canceled to make up time and regain schedule reliability, or to respond to lack of demand. High volumes of containers are still moving out of China, however canceled sailings limit the availability of vessel space which can lead to higher freight prices. Spot rates have dropped below long-term contract rates for the first time in years, but this could all change in the near future if ocean carriers decide to omit certain U.S. ports to accelerate trade.

Bottleneck at east coast ports

All of the avenues of trade are connected. According to MarineTraffic, approximately 460,000 TEUs were loaded on vessels waiting off U.S. east coast ports as well as 180,000 off west coast ports as of July 13. The congestion is building exponentially on the east coast with $1.2 million in trade and a total combined volume of 311,300 TEUs anchored off Savannah, Georgia. That is over half a month’s volume of what Savannah typically handles. The port currently has 42 ships waiting for berths which is six times the number the port can accommodate and translates to a 14 day wait at anchor.

While the sharpest increase of ships waiting for berths has been seen at Savannah, Houston and New York have as many containerships waiting for berths as Los Angeles and Long Beach combined. As of July, Port Houston had handled just shy of 2 million TEU (a 18% YOY increase).

As cargo hits the United States from Europe, east coast ports will continue to feel the strain. Rerouting ships to New York, New Jersey, and Charleston will not solve the problem because congestion will also build up there. The ping pong congestion effect has already disrupted strained landside operations and going forward the delays at US ports are continued to be expected. The top largest US ports saw a 5.9% increase in inbound volumes in July. Containerships are now waiting along all coasts and nearly all ports are operating near or at capacity.

Choosing a trusted logistics partner

According to Sea-Intelligence, only 30 – 40% of all global schedules are on time in relation to vessel schedule reliability. Logistical planning has never been more vital to the success of a business than in today’s disrupted market. Partnering with a trusted logistics provider to navigate current supply chain intricacies can provide businesses with a competitive edge.

“The supply chain has forced many of our customers into unfamiliar territory. Port congestion has never been higher, and diversions are happening every day which can make it difficult to do business. At ITS, we have procured a network of pop-up yards around east and west coast seaports. This allowed us to keep our customers’ freight moving, even when delays occurred.”

– Paul Brashier, VP of Drayage and Intermodal

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