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IHSA

Supply Chain Concerns Will Dominate 2022

January 5, 2022

Shippers were hoping 2022 would bring some much needed relief to the U.S. supply chain. Unfortunately, early economic indicators are showing the current supply chain difficulties will last well into 2022. Some industry analysts are predicting that 2022 could actually be worse than 2021 for some importers.

Record consumer demand in the Asia to U.S. market continues to be the primary driving force behind the supply chain woes. The first 10 months of 2021 saw demand increase 19.5 percent from the same period in 2020. As long as consumers focus their spending on tangible goods, the supply chain will remain oversubscribed. There is nothing to indicate that consumers are ready to start spending more on services such as travel and less on tangible goods. When the final numbers are tabulated, it is expected that 2021 retail sales will show double digit growth over 2020.

Carriers have no plans to increase capacity in the Asia to U.S. trade lane. The current supply chain bottlenecks on the U.S. side are preventing carriers from adding new capacity. The carriers have determined that ships sitting idle outside U.S. ports waiting to be unloaded for weeks is not helping the situation. Idle ships are only adding to the current supply chain woes by effectively reducing available capacity and negatively impacting on-time schedule reliability.

The major challenge for ALL importers during 2022 will be the same as 2021. Finding sufficient carriers to meet forecasted container demand will be difficult. Even if you have a 2021 contract with a long-term carrier partner, there is no guarantee that same carrier will agree to a new contract for 2022.

Carriers are going to be very selective on the contracts they choose to finalize. For example, contracts that require a heavy dose of inland rail transportation or door delivery service will be far less attractive than port-to-port contracts. Even though carriers have been offering these types of services for over 20 years, importers need to accept that shipping containers from Asia to the U.S. has changed drastically over the last two years.

Carriers are expected to sell out all 2022 contract space by mid-March. Some importers, through no fault of their own, will be squeezed out of the 2022 contract process. These importers will have no choice but to find a new provider to move their containers, which will be a tremendous challenge considering the strength of the projected Asia to U.S. market.

Filed Under: All Posts, IHSA Shippers Association, Industry Resources

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