January 2022: Supply Chain Digest

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INDUSTRY NEWS

• As of January 16th, the Port of Los Angeles is reporting 16 container ships in port with 9 awaiting berth within the 40 nautical miles of both LAX and LGB ports. In addition, there are another 94 container ships en route to San Pedro Bay, home to both LAX and LGB ports.
• The backlog of containers at the Port of LAX continues to create challenges with 15,209 containers sitting at the port over nine days, illustrating continued challenges to clear the backlog of containers.
• Due most likely to a lack of inventory and higher prices, online holiday consumer spending grew at 8.6% from November 1 thru December 31st, in comparison to prior years where online holiday spending was at least 13%.
• Mediterranean Shipping Co. (MSC) has taken over the top spot from A.P. Moller-Maersk A/S as the world’s largest ocean carrier based on capacity.
• Consensus for West Coast ports in 2022 does not look favorable in overcoming the poor performance of 2021. Vessel’s on-time arrivals at West Coast ports averaged close to 10%. Historically, 60% to 80% on-time performance has been the norm. Adding to the challenge is the interior backlogs that occur in inland gateways such as Chicago, Memphis and Dallas.
• A.P. Moller-Maersk has reported preliminary results for 2021 with a projected $24 billion in EBITDA for 2021. Fourth-quarter freight rates propelled the 2021 forecast with an 80% improvement from the average freight rates during the fourth quarter last year.
• Shell is proceeding with plans to develop the world’s large green hydrogen facility at the Port of Rotterdam. The hydrogen can be transported through a pipeline with a length of 25 miles to Shell’s Energy and Chemicals Park Rotterdam.
• U.S. energy firms added the most oil and natural gas rigs in a week since April. The oil and gas rig count rose 13 rigs to 601 for the week. U.S. crude futures hit $84 per barrel in trading making it the fourth-week row that futures rose.
• The U.S. Census Bureau announced the new manufacturing and trade statistics for November 2021. The total business inventories/sales ratio ended at 1.25 in November compared to 1.35 in November 2020. The 1.3% increase over 2020 still has a great deal of room for improvement as manufacturers continue to work through supplier challenges.
• In a sign of robust air freight, Boeing announced an order of 19 freighter planes to UPS. The deal is in addition to UPS’s 80 new Boeing wide-body freighters. The order comes as UPS announces a record cargo performance in 2021.
• Chinese New Year is looking like “business as usual” as the traditional 20% reduction in sailings traditionally seen during this time is only at 2.1%.

ROCKFARM One View

There is a cowboy saying that goes something like this: “Every day is a good day when you ride.” 2021 gave us a lot of good days with 2022 shaping up to be much of the same. The Rockfarm truckload index hit a high mark of $3.69 per mile rate in December and shows no sign of slowing down as we work our way through the start of 2022. The Rockfarm Market indexes in the head haul lanes all show reached new heights in December and into January, illustrating a lot of constraints in truck capacity. Fuel prices add to the ongoing truck capacity challenges. Some analysts are predicting $100 per barrel pricing in 2022, with oil now above $80 per barrel. Demand and supply challenges are leading the charge to push oil above the $100 mark. According to a recent article by Irina Slav, a writer for Oilprice.com, the
defining moment for higher oil prices will be when OPEC brings its spare capacity online. It will mark a watershed moment and trigger the most bullish market for decades.

Where does this leave us? There is no sign of turning the corner and seeing rate stabilization in the near future. Strategic decision-making focused on when to lock in rates and begin deeper sourcing of additional carrier capacity has become a key initiative for shippers as we start our next ride.

Work With the Experts

FOR MORE INFORMATION, PLEASE REACH OUT TO INFO@ROCKFARM.COM.

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By Brad Stewart

Co-Founder, CCO

Brad’s journey into logistics began as a Marine Officer and transitioned from the LTL docks to the non-asset side within the logistics service provider arena.  As a co-founder of Rockfarm, Brad drives our business development efforts and delivery of our promise. An Arizona native, Brad enjoys spending time outdoors in his home state with his wife and family.

“Our approach to the market allowed us an opportunity to push forward in 2008 and enable our mission, “lower the cost to serve” to stand as a cornerstone to our company today.”

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References

PORT OF LA OPERATIONS REPORT (Friday, January 14, 2022)

https://kentico.portoflosangeles.org/getmedia/364e98ad-6c0d-44d9-a6e9-4686dec2d71a/operations-report

Holman, J. (2022 January) US Online Holiday Spending Grows at Slowest Rate in Seven Years
https://www.ttnews.com/articles/us-online-holiday-spending-grows-slowest-rate-seven-years

Wienberg, C. (2022 January) Maersk Overtaken as World’s No. 1 Shipping Line by MSC
https://www.ttnews.com/articles/maersk-overtaken-worlds-no-1-shipping-line-msc

Mongelluzzo, B. (2022 January). Outlook 2022: West Coast ports face continued congestion, vessel backlogs
https://www.joc.com/maritime-news/short-sea-shipping/outlook-2022-west-coast-ports-face- continued-congestion-vessel-backlogs_20220114.html

The Maritime Executive. (2022 January). Maersk Reports 2021 Earning Will Exceed Forecasts by $1 to $2 Billion
https://www.maritime-executive.com/article/maersk-reports-2021-earnings-will-exceed-forecastsby-1-to-2-billion

The Maritime Executive (2022 January). Shell Signs Contract for Green Hydrogen Plant in Rotterdam
https://www.maritime-executive.com/article/shell-signs-contract-for-green-hydrogen-plant-in- Rotterdam

Hellenic Shipping News. (2022 January). U.S. drillers add most oil and gas rigs in a week since April – Baker Hughes
https://www.hellenicshippingnews.com/u-s-drillers-add-most-oil-and-gas-rigs-in-a-week-since- april-baker-hughes/

census.gov (2022 January). Manufacturing and trade inventories and sales, November 2021
https://www.census.gov/mtis/www/data/pdf/mtis_current.pdf

Slav, I. (2022 January). A Watershed Moment That Could Send Oil Prices to $100

https://oilprice.com/Energy/Crude-Oil/A-Watershed-Moment-That-Could-Send-Oil-Prices-To-100.html

Sharkey, G. (2022 January). After record-breaking Q4, project44 begins 2022 with $2.4B valuation

Brown, S. (2019 August). Supply Chain Visibility boosts consumer trust, and even sales

https://mitsloan.mit.edu/ideas-made-to-matter/supply-chain-visibility-boosts-consumer-trust-and-even-sales