SPRING 2024

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THE DISTRIBUTOR’S LINK
CHRIS DONNELL LOGISTICS AND SUPPLY CHAIN AT A GLANCE from page 38
First, the change from an El Nino to La Nina weather
cycle. The El Nino cycles has created havoc with the
weather patterns in and around Panama, resulting is a
severe 3-year drought. The switch to a La Nina cycle
will cause surface temperatures of the ocean to cool
resulting in a higher chance for storms and weather
needed to bring moisture to Panama. The second
and arguably the most important change, at least for
importers / exporters, is the fact that the Panama Canal
Authority just announced it’s eliminating the restrictions
put in place on container vessels transitioning through
the canal. This is great news, however, don’t expect
to see any significant changes with the carriers for
several months. This also depends on whether the Canal
Authority follows through with their claims. It will take
time to adjust routings, filter through the back-log, and
get all administrative agreements in place. This should
open up capacity at the origin, eliminate a lot of Red Sea
traffic, and ultimately reduce costs.
Another issue currently taking hold involves the
routing of cargo. Importers are eliminating the risks
of shipping through the Panama and Suez canals and
routing their cargo via rail inland from the West Coast.
This switch in routing is having a negative impact on the
ports and their ability to handle the additional cargo,
resulting in elevated levels of congestion and other
delays. We’re seeing upwards of 7–12-day delays for
railed cargo from the ports of Seattle and Tacoma and
3-4-day delays in Los Angeles, our nation’s busiest
ocean terminal. It’s hopeful that with the reduction or
elimination of restrictions through the Panama Canal,
this congestion on the West Coast will subside.
My last topic regarding the ocean sector surrounds
the large amount of misinformation that is out in the
market place. I’ve heard countless times that importers
don’t understand why rates are highly elevated, why
there are capacity issues overseas when its being
reported in various publications that capacity is wide
open, so let me set the record straight. First, the rates
have been elevated since late October of 2023. As of
Valentine’s Day 2024, ocean rates have increased by
more than 300%. This is due in large part to the issues
I’ve mentioned above, as well as the increase in overall
import volumes year over year. You read that correctly,
imports for the month of January increased by more than
7% over the same time last year and more than 4% over
December of 2023. That’s a significant increase. It gives
ocean carriers further leverage to manipulate the ocean
rate market. Also contributing to the capacity constraints
throughout the Pacific Rim is the carrier’s continuation
of their “blank sailing” process. At the current time, a
blank sailing affects every 1 out of 5 vessels resulting
in equipment shortages, port congestion and increased
lead times; all of which gives the impression of a robust
shipping environment and allows the ocean carriers to
hold or raise costs.
Again, there’s light at the end of the tunnel. Word
has it that shortly after the conclusion of the Chinese
Lunar New Year celebration, ocean rates should start
to subside and that trend should continue until the new
shipping season starts in May.
Port And Rail News
Other than slight congestion at the ports on the
west coast, things are running fairly routine. In fact, the
rail carriers have played a significant role in keeping
congestion to a minimum, especially with the increased
demand on the west coast ocean terminals. As an
example, during the pandemic, the rail carriers were the
first to eliminate routings or suspend services to inland
rail ramps. Today the rail lines are focusing on opening
channels which weren’t readily available such as rail
traffic from the West Coast to the upper Northeast.
Rail tonnage and traffic has increased roughly 4.5%
week over week and more than 6.4% higher than in
December of 2024.
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