2nd Quarter – 2022

Port Performance

The Headline: COVID shutdowns and strong consumer demand are keeping pressure on ports, which are still struggling to work through historic backlogs. And, Russia’s aggression is one additional wildcard that is preventing any real certainty of what’s to come. Potential labor issues on the US West Coast are another Q2 issue.

What’s Important: The chart to the right not-with-standing (it’s actually kind of encouraging), hold-off on thoughts about a quick return to normal. The drivers of the current problems (COVID and demand) remain. Our advice is to order well in advance, factor in for delays, and share open orders with your logistics provider so they can be proactive securing equipment and space.

The Outlook

European Update

The Headline: The war in Ukraine is the dominant story for European supply chains for obvious reasons. There have been volatile swings in energy prices and how freely freight has been able to move through the region.

What’s Important: Even with resolution of the conflict, there’s undoubtedly been a permanent shift for the whole region. The economic sanctions and damaged trade partnerships (even those not involving Russia directly) will take years at best to be mended. Companies should consider risk mitigation with regards to sourcing, as well as extended lead times, and production and distribution delays.

Ocean Freight

The Headline: Sustained high rates and volatile bunker costs are top concerns for ocean shippers right now. The US government has indicated maintaining fair competition and improving infrastructure are current priorities.

What’s Important: Despite the softening of rates from last year’s highs, we remain very much in a “space market” rather than a “rates market” and shippers are best advised to ensure they have access to sufficient capacity when their orders becomes available at overseas factories.

Air Freight

The Headline: The COVID shutdown in Shanghai that was in place as of April 1 is already proven to be longer-lived than previous city and port shutdowns since the early days of the pandemic. Air freight has been impacted more directly than ports and factories at this point.

What’s Important: China’s zero-COVID policy is still being enforced. And no matter how ready the majority of the rest of the world is to move on from COVID, there is no getting back to normal for supply chains until China is ready.

US Inland Rate Trends

The Headline: After years of increasing rates and tight capacity, there is some optimism appearing (although dry van spot rates are still up 14%+ YoY according to DAT).

What’s Important: This is a good sign for obvious reasons when it comes to logistics budgets. It may, however, be a sign that overall consumer demand is weakening and a signal that a slow down is coming for other parts of the economy. Companies should be diligent and test the truckload and rail spot rate markets frequently to ensure they are paying appropriate rates to take advantage of any decrease.

Supply Chain Risk Index

The Headline: Of all the categories this index measures, the Transportation Disruption Risk is expected to increase the most substantially in the 2nd quarter of 2022 with fuel prices, driver shortage, infrastructure, and demand as the top concerns.

What’s Important: Interestingly, Supplier Risk is showing a very large forecasted decrease. And overall, the Average Risk Index trend is down. This sentiment seems to counter the prevailing market conditions which may signal the general optimism (whether it is premature or not) that the worst of COVID and supply chain disruption is behind us.

Logistics Manager’s Index

The Headline: The LMI reading of 76.2, indicating growth is increasing at an increased rate for Inventory Costs, Warehousing Utilization, Warehousing Prices, Transportation Utilization, and Transportation Prices. Meanwhile growth is increasing, but at a decreasing rate for Inventories. And, contracting for Warehousing Capacity and Transportation Capacity.

What’s Important: Notable is the inventory growth is slowing, another sign market demand is decreasing and the inventory levels that were built up in 2021 are meeting forecasted demand. With this very slight breather being offered by the markets, the timing is good for companies to evaluate their own inventories and plan for the balance of 2022.

N American Import Volumes

The Headline: According to recent projections, the volume of merchandise imports is expected to increase by 4.5 percent in 2022 in North America. In 2020, the imports trade volume had declined by 6.1 percent in this region.

What’s Important: The projected growth rate is in-line with figures from 2017 and 2018 which is another potential sign of some post-pandemic normalcy. If nothing else, we will hopefully be able to look back at the end of the year and understand if all the current supply chain infrastructure issues of the past year were temporary blimps or long-term.