Commentary Land Lines

By Lawrence Gross

We ’ ve seen this movie before . We know what happens when ocean rates spike .

Well , I didn ’ t see that coming . Given the state of the world economy and the amount of new capacity being added by ocean carriers in 2024 , I would not have thought it possible for the global supply chain to experience a shortage of containers . Yet that seems to be precisely what is taking place , according to recent reports and , more importantly , spot prices .

What might it mean for North American intermodal ? Will this be a repeat of the chaos experienced in 2021 and 2022 ?

The author Mark Twain is reputed to have said , “ History doesn ’ t repeat itself , but it often rhymes .” That seems to be the case here .

Despite the large year-over-year gains , the current level of import TEUs arriving in the US and Western Canada is not out of the ordinary . Volumes are well below the peaks seen during the post-pandemic surge and only back up to trend based on GDP growth .

Unlike the disruptions seen during the COVID-19 pandemic , when North America was the nexus of congestion and other trades were operating relatively smoothly , currently the problem lies elsewhere . Capacity is being chewed up by extended voyages around southern Africa and port congestion and backups , both in the Eastern Mediterranean Sea and North Asia . As pointed out by maritime analyst Lars Jensen in a recent column , these factors have reduced container productivity and , when coupled with stronger-than-expected global demand , tilted the balance toward shortage . As Jensen noted , the durability of the current shortage is a huge question . Much of the current global strength in demand may well be a pull-forward of peak season and therefore , short-lived . Here in North America , threatened tariff actions on China-originating goods and the potential for East Cost labor disruption both provide importers with good reasons for moving purchases forward in time . This indicates that the situation will ease later in the year .

Further , the crisis will evaporate if the Middle East situation calms and ships start sailing through the Red Sea again , as unlikely as that seems for the moment . But the current situation doesn ’ t have to last that long to have some big impacts on North American intermodal .

Chizhevskaya Ekaterina / Shutterstock . com

44 Journal of Commerce | July 1 , 2024 www . joc . com