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Chinese trucking sector faces mounting Covid disruptions
Trucking operations in key coastal cities in China are coming under increasing pressure amid a surge of new Covid cases. Truckers transporting cargo from high- and medium-risk areas to low-risk areas are virtually banned.
There are roughly 30 high-risk and 300 medium-risk areas in China. Dalian, Tianjin, parts of Beijing, Shanghai, and Dongguan are all considered high- or medium-risk areas.
Truckers in Ningbo and Zhejiang Province need to show a health pass while those coming from outside Zhejiang need to provide a negative test less than 24 hours old. No cargo will be accepted if drivers have been to medium- or high-risk areas within the last 14 days.
The truth about trucking turnover: ATA
As of late, many have pointed out that the industry faces a labor shortage due to high turnover rates. However, these people do not properly understand what the truck driver turnover rate measures.
They assume that the rate captures drivers leaving the industry and often cite poor pay or working conditions as the reason – that is incorrect. Turnover does not show people leaving the industry. Rather, it measures drivers moving between carriers. It captures churn, not attrition.
Drivers are moving between fleets for many reasons. Trucking is an extremely tight labor market, and drivers are in high-demand. To attract and retain drivers, fleets must increase pay. We have been witnessing unprecedented pay increases, with weekly driver earnings surging at a rate more than 5x their historical average. Carriers are also offering sign-on bonuses and full benefits to compete for the limited pool of drivers.
SE ports anticipate import surge this summer
Southeast U.S. ports are warning of a coming import surge and subsequent vessel backlogs this summer, as volumes continue to shift away from the West Coast. Ports in the mid-Atlantic and Southeast say operational pressures are increasing, with no end in sight. They are unsure if they will be able to clear existing ship backlogs before the expected summer surge.
Additionally, fears of work slowdowns tied to WC labor negotiations are driving retailers and others to move cargo toward the East and Gulf coasts. In Q1, Asian imports into Charleston, Savannah, and Virginia increased 16% YoY. These ports are also feeling the pressure of extra loaders and late-arriving vessels.
Smaller ports like Baltimore, Jacksonville, and Wilmington, NC are free of congestion. However, they have lost Asian import share as importers gravitate toward larger hubs. Asian imports into these secondary ports fell a combined 20% between January and March.
Guessing path of unprecedented ocean market no easy feat
It is not easy to assess where the trans-Pacific market is currently headed. On one hand, no one has ever experienced a market such as this. On the other hand, many say that although the current scenario may appear contradictory and confused, key themes are taking shape even amid a highly fluid scenario.
Key among those themes is the continuing strength of the U.S. consumer and the resulting record import volumes. The combination of U.S. import volumes that have grown 20% from pre-pandemic 2019 and repeated ongoing shocks to the supply chain will continue to disrupt cargo flow throughout much of 2022.
It could be a few years before a pre-pandemic balance between good and services spending is restored. Until then, containerized imports will remain elevated, resulting in ongoing pressure on port flow, trucking capacity, chassis, supply, and distribution centers.
Small U.S. importers struggle as major players find inventory footing
For each major shipper able to charter their own ships, there are hundreds of smaller importers that lack the transportation budgets to make such moves. These smaller importers are still scrambling and have little sense of when inventory disruption will ease.
Smaller importers have been turning to smaller forwarders, who are getting capacity from larger forwarders, to get vessel space out of ports in China and Vietnam. However, these smaller forwarders cancel on them when someone else offers to pay more for the space.
About O’Neill Logistics
O’Neill Logistics is a leading 3PL with operations in Rancho Cucamonga, CA; Savannah, GA; and Newark/Monroe, NJ. We service many verticals including Garments, Fashion Accessories, Footwear, Furniture, Home Goods, & Electronics. Additionally, we offer omni-channel distribution and all value-added services. Lastly, we focus on retail “drop shipment” fulfillment and item-level fulfillment services with same-day service offerings.
O’Neill Logistics has over 2 million square feet of state-of-the-art facilities. Additionally, we offer dray services to support the warehouses and provide distribution to retailers and wholesalers. Our reliable 3PL platform combines sophisticated technology with robust, flexible processing designs and speed-to-market gateway models.
Lastly, we aim to simplify your supply chain. We deliver exceptional service and can optimize your operational performance. Therefore, we aim to build, protect and foster strong business partnerships
