Trans-Pacific container bottlenecks likely to last until end of Q2: Hapag-Lloyd

Port congestion and other logistical bottlenecks that are delaying container ship services and keeping freight rates elevated are likely to last until the end of the second-quarter, German shipowner Hapag-Lloyd's North America President Uffe Ostergaard said on Feb. 4.

Congestion at US ports will get worse in the months ahead before it gets better, Ostergaard said in a virtual forum. The growing queue at the Ports of Los Angeles and Long Beach, strained beyond capacity by relentless import volumes, will push ships towards other ports and create further pile-ups elsewhere.

"We are in for a prolonged period of bottlenecks that we are expecting to last until summer around the end of the second quarter," Ostergaard said. "We're looking at 2-3 weeks of delays in some cases. Not necessarily at anchor, because some of our ships are steaming more slowly from Asia in anticipation of delays."

There were 35 ships at anchor in Southern California's San Pedro Bay on Feb. 4, and another 12 anchored in a growing queue off the Port of Oakland, according to cFlow, Platts trade-flow software. As the line-ups continue to grow in the weeks ahead, wait times for ships to berth at the ports are expected to extend beyond the current 10-14 days for Los Angeles/Long Beach and 3-6 days at Oakland.

There is no let up in US import demand expected for the near term as retail inventory levels have remained unchanged at low levels for months as all stocks are put forward to consumers, Ostergaard said. And further stimulus payments by the US government to counter the economic effects of the coronavirus pandemic could increase consumer demand for goods almost immediately.

West Coast terminal facilities are not the only bottlenecks in the system either, Ostergaard said. There are also shortages of available truck chassis to carry cargoes out of the ports, requiring a lead time of 21 days to book a truck at Los Angeles and 14-15 days at the east coast ports of Norfolk and Savannah.

"We book our trucks well in advance, but the risk of cancellations or delays are substantial," Ostergaard said. "It's hard to give any clear expectations on delivery times. It's a lot of uncertainty at this point."

Hapag-Lloyd has taken steps to mitigate the congestion, such as using the alternative Port of Norfolk when the Port of New York and New Jersey in congested, and has been shipping empty containers from Los Angeles by rail to export from Houston at increased cost to the shipowner. But the construction of new containers will take months to improve the shortages being experienced in Asia and there are virtually no container ships available in the market for charter to increase carrying capacity, Ostergaard said.

Relief to the US container import overload may only come when a significant percentage of the population is vaccinated against the coronavirus and spending habits rebalance towards services, he said.

Hapag-Lloyd and its THE Alliance vessel sharing partner One Network Express announced on Jan. 26 that more than 20 scheduled trans-Pacific sailings in February and March would be effectively canceled as delays accumulate into a full round-trip blanked service.

Platts Container Rate 13 -- North Asia to West Coast North America -- was assessed Feb. 4 at $4,200/FEU, a threefold increase from the $1,400/FEU assessment one year ago.