3.4 There is no solution to the bottleneck, you only have to wait for the demand
The bottleneck of container transportation is the port, and the growth rates of container shipments, port throughput, and railway and road transportation have shown a downward trend in sequence. In September 2021, the two-year compound growth rate of North American container demand and Asia-North America container shipments was 12.5% and 10.6% respectively, the compound growth rate of imported containers in Los Angeles and Long Beach was 5.8%, and the growth rate of road traffic and rail traffic was were 1.7% and -1.9%, respectively. There are many reasons for the formation of bottlenecks. High demand, labor shortage and insufficient chassis are the main reasons. There is no solution to the bottleneck of labor and chassis, and the improvement of supply can only wait for the decline in demand.
Compared with the three-shift working system in other countries, such as China and Europe, the operating time in the United States is significantly reduced by 1/3, which limits the terminal capacity. If the terminal operation time is extended, it means that an additional 50% of the terminal labor needs to be hired, which is almost difficult to complete under the epidemic environment. Even if it is not affected by the epidemic, it is difficult to achieve a 50% increase in the labor force in the short term.
The labor bottleneck for inland transportation is even more pronounced. In the United States, containers are transported to inland terminals via ports after they arrive, mainly by trucks and railways, of which trucks account for about 70% and are the most important way of back-end transportation of containers. Compared with other industries, the transportation industry has low salary and high work intensity. In addition, the transportation industry itself is highly risky, and the casualty rate is higher than that of ordinary industries. In addition to the impact of the epidemic, the risk is increased, and the progress of employment recovery is faster than that of ordinary industries. slow. As of October 2021, there is a 33,000/1.9% shortfall in trucking and railroad employment compared to pre-pandemic levels. According to estimates by the American ATA Association, there is a shortage of about 80,000 truck drivers, while this number was only 60,000 before the epidemic. Coupled with the serious aging of truck drivers, it is estimated that 110,000 new employees must be hired every year to ensure the balance of supply and demand in the truck industry.
There are total of about 115,000 chassis (40 feet / 20 feet = 8:1) in Los Angeles and Long Beach areas, of which 58,000 are operating in the chassis pool (90% of the chassis pool has been put into use, of which about 15,000 are in the port, and the rest are outside Hong Kong), and the rest are privately owned. The shortage of chassis and truck drivers has jointly limited the efficiency of land transportation, and the transit warehouses outside the port are basically bursting, the containers arriving at the warehouse cannot be quickly loaded and unloaded, and the turnover of the chassis outside the port is prolonged. In early November 2021, the average detention time of the chassis outside the port is about 9 days. , well beyond the normal level of 3.5-4 days. In addition, there are about 15.6 TEU of containers waiting to be shipped out at the ports of Los Angeles and Long Beach, and about 700,000 TEU of containers waiting to be loaded and unloaded at sea, far exceeding the number of chassis. However, the back-end logistics efficiency has declined, the efficiency of container dredging has been under pressure, and the turnover of containers and chassis in the port has been extended. The 20-foot chassis is stranded in the port for an average of 6 days, and the 40-foot chassis is about 3 days.
Insufficient production capacity and the difficulty of cross-regional mobilization. It is difficult to improve the shortage of chassis. 92% of U.S. container chassis are mainly made in China. China container factory CIMC’s chassis car manufacturer in the U.S., CIE Manufacturing Inc., is the world’s largest chassis manufacturer with an annual production capacity of 60,000 units. Its two major U.S. factories are located in Southern California and Virginia. State, is a major chassis supplier to the ports of Los Angeles, Long Beach and Savannah in the eastern United States. In March 2021, in order to protect local chassis manufacturers, the US Department of Commerce announced a 220% anti-dumping and countervailing duty on CIE. However, due to insufficient local production capacity and the impact of the epidemic, it is difficult to improve the supply of chassis vehicles. It is reported that orders from local chassis manufacturers have been placed in 2022. On the other hand, it is difficult to transfer chassis across regions, and the chassis is mainly transported by trucks. Considering the impact of transportation distance and transportation cost, it is difficult to form a substitute for chassis between regions. Therefore, the shortage of chassis vehicles in the US West and US East ports is difficult to pass. Regional transfers are resolved.
3.4 Insufficient supply elasticity upwards and abundant downwards
Insufficient upward elasticity of supply. Ship idling rates are at historically low levels. Beginning in early June 2020, the idle rate of container ships continued to decline from a high of around 10%, and fell to a historical low of around 3% in the third quarter, and then continued to remain at this low level in 2021. The free space for idle capacity is limited. Not enough room for acceleration. Starting from the third quarter of 2020, container ships will continue to be in a speed-up cycle, and the speed will remain at around 17 knots in 2021. Estimated at a maximum speed of 17 knots, the usual Asia-Western loop sea voyage time is about 35 days. To save 7 days of time from the sea voyage, it is estimated that a speed increase of 25% – or 21.25 knots – can be achieved. In fact, the average speed of about 17 knots is already a high level in history, and the ships are almost at the maximum speed allowed by the conditions. Therefore, the current speed-up space is very limited, and it is difficult to bring any improvement to the capacity.
There is ample room for downside capacity. In the first half of 2020, while the container idle rate reached a historical high, the speed of the ship also decreased to a certain extent. The combination of the two methods effectively reduced the supply of market capacity, thus ensuring the basic balance of supply and demand, and the decline in freight rates during the period was limited. Therefore, it is expected that in 2022, once the market has formed a consistent expectation of a decline in demand, coupled with a very high concentration of the container market, it is not ruled out that liner companies will jointly reduce the supply of transportation capacity to alleviate the impact of the decline in demand on the transportation capacity, mainly by reducing speed and increasing idle. In addition, a certain degree of deceleration can reduce fuel expenses, thereby increasing profits and easing the drag on profits from falling freight rates. From this point of view, the downward elasticity of supply will provide a safety pad for freight rates, and the process of falling freight rates will be buffered.