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  • Writer's pictureSynthetic Resources Inc

June update on Supply chain woes

Updated: Apr 12

ILW Port strike Status

Long Beach Port Chief Doesn’t See Labor Deal by July 1 Deadline

The head of the US’s second-busiest port doesn’t see talks over new labor contracts for 22,000 dockworkers at 29 West Coast operations reaching settlement by a July 1 deadline, but is optimistic of a solution a month or two later.

“I have confidence that the two parties know what’s at stake here,” Port of Long Beach Executive Director Mario Cordero said on Bloomberg Television on Friday. “They will resolve their differences within a reasonable time. It’s not going to be before July 1. But I think we may be looking to a couple of months thereafter. On that front, I’m optimistic.”

Talks to work out the new labor contract started May 10. The International Longshore and Warehouse Union and the Pacific Maritime Association — which represents about 70 employers — both say they expect cargo to keep moving until an agreement is reached.

When the parties last got together to discuss contracts in 2014, West Coast ports faced months of slowdowns that only ended when the White House got involved.

Two years of record consumer spending have seen cargo loads hammer ports, particularly on the US West Coast, with delays and congestion. Workers are seen as having additional leverage as carriers have reaped record profits in a tight market. While wages and benefits are frequent sticking points, the employers’ right to automate could emerge as a particularly thorny issue.

Cordero’s caution comes after the Journal of Commerce reported Friday that the ILWU asked for negotiations to be put on hold until June, citing people it didn’t identify who are close to the matter. Last week, both parties said the talks would happen on a daily basis until an agreement was reached. The union didn’t respond to a request for comment, while the PMA declined to comment.

Earlier this week, Port of Los Angeles Executive Director Gene Seroka said there’s “no need to worry right now” about the negotiations, adding that “dockworkers are still going out in record numbers and will continue to do so.”

Should an agreement not be reached, “we have implemented measures to make sure that we keep some fluidity in the movement of cargo,” Cordero said in a separate interview on Bloomberg Radio, pointing to the pilot 24/7 initiative at Long Beach and Los Angeles.

“I don’t expect a slowdown by labor,” the Long Beach port chief said. “For us, we’re certainly better prepared to address any type of scenario than maybe we were a year ago.”

Peak Season

Cordero said the port is preparing for the peak season in shipping, which usually starts in July ahead of the holiday season. This year, it’s likely to coincide with the increase in cargo arrivals that had been held back from the US because of the lockdowns in China. “That’s going to have a domino effect,” he said.

“An uptick? Yes. To what extent? We don’t know,” he added.

–With assistance from Romaine Bostick, Caroline Hyde, Taylor Riggs, Tim Stenovec and Katie Greifeld.

Possible effect : Increase in ocean freight cost due to demand. Longer lead time for transit . Continue shortage on equipment. Key is plan ahead.

Ocean Market condition :

The market in Long Beach/Los Angeles remains congested despite inbound volumes from China decreasing due to COVID lockdowns. We are cautiously awaiting the impact as Shanghai begins reopening after two months of restrictions. There are currently 11 vessels at anchor, 55 near the port, and export dwell is on average 7-15 days. Schedule reliability continues to be low and impact terminal operations. Truckers and shipping facilities continue to see the impact of these schedule shifts, having to make several last-minute adjustments with manpower, securing equipment within receiving windows, and load and in-gate containers within small and late announced receiving windows. Lastly, the ILWU is also in the middle of contract negotiations with an expiration of their current contract of July 1 2022.

With regards to transit and capacity: US-Asia has slightly opened up. Bookings are 2-4 weeks out. North East Asia is slightly quicker and easier to secure than South East Asia which often requires transship. US-Australia remains extremely congested. Bookings are 3-6 weeks out. Long Beach terminal operations have moved from SSA to ITS. US-Europe is 2-4 weeks out. Options remain limited. Transit is up from 35-40 days to 50-60 days for some services. US-MAIR and Africa is also impacted by subsequent Europe/Asia tranships. Transit time is generally up and rail options are limited. Bookings are 2-4 weeks out. US-South America capacity is limited. Bookings are 2-4 weeks out.

Recent COVID-19 outbreak has resulted with tighter control, and the restrictions are causing labor shortage, equipment shortage, terminal congestions and also sailing schedule delay in especially following ports:

Los Angeles(US) - It is expected that ships will be waiting for berth in about 9 – 10 days

New York(US) - It is expected that ships will be waiting for berth in about 3 days

Please keep in mind this does not include slow down in transit time due to congestion at port.

Diesel price out of control

Diesel costs are reaching new highs across the U.S., straining the operations of trucking companies and wrecking the Transportation budgets of businesses that need to ship goods. The price of the fuel that powers heavy-duty trucks has increased by more than $1.50 a gallon in roughly two months, according to the U.S. Energy Information Administration. The national average price has climbed to $5.62 a gallon, setting a record for the second week in a row, as prices at the pump surpassed $6 in some markets. CA 7.06 /gallon

“These fuel costs are the biggest thing we’re facing right now,” said Jake Phipps, chief executive of Phipps & Co., a West Palm Beach, Fla.-based manufacturer of interior finishes and building materials for real-estate developers. He said the company’s shipping costs within the U.S. have risen 15% to 20% from last year, pushing it to make changes to its distribution operations as some customers reconsider projects because of rising costs.

“It’s causing us to look more closely at where a project is and what it takes to ship there,” Mr. Phipps said. “We’re trying to use rail as much as we can, which saves a little bit. But that isn’t always possible. Otherwise all we can do is pass the cost along to our customers.” Average weekly price per gallon for diesel fuel in the U.S., nationally and regionallySource: U.S. Energy Information Administration 2019'20'21'222.002.503.003.504.004.505.005.50$6.00National AverageMidwestWest Coast Rising energy prices, along with higher material costs and growing labor expenses, have helped push inflation in the U.S. to a four-decade high. The costs have hit consumers at the pump, with gasoline prices across the U.S. up by about a third since the start of the year to about $4.33 a gallon, according to the EIA. Gas prices have moderated recently, however, while the price for the diesel fuel that is crucial to industrial business has continued going up. That has added to rising costs in supply chains and to inflation pressure on things from housing construction to deliveries of consumer goods. The costs are hitting smaller trucking fleets that make up the bulk of the highly fragmented U.S. trucking market particularly hard, worsening cash flows for businesses that tend to be lightly capitalized with little cushion to absorb sharp changes in costs. Prices Are Changing More Often. Here’s How Stores Are Doing ItPlay video: Prices Are Changing More Often. Here’s How Stores Are Doing It Airlines, gas stations and retailers use complex algorithms to adjust their prices in response to cost, demand and competition. WSJ’s Charity Scott explains what dynamic pricing is and why companies are using it more often. Illustration: Adele Morgan The national average price of diesel has risen about $2 a gallon since the start of the year and pump prices have surged past $6 a gallon in several regional markets, including New England and Central Atlantic states. In California, where historically fuel costs more than in the rest of the country, the average price was just above $6.46 a gallon last week, by the EIA measure. “It’s going up faster than we can keep up with,” said Doug Smith, a vice president at Ralph Smith Co., a family-owned trucking company based in Bountiful, Utah. “It’s getting to the point where things are going to grind to a halt” as industrial customers reconsider projects and consumers balk at higher prices for goods. U.S. commercial vehicles, including big rigs, burn about 36.5 billion gallons of diesel annually, according to the American Trucking Associations, and motor carriers spent about $111.6 billion on diesel fuel in 2019, the last full year for which figures were available. Trucking companies generally can cover rising diesel prices through fuel surcharges that are built into contracts. But the thousands of smaller fleets and independent owner-operators that make up the bulk of the highly fragmented truck market have a harder time passing along the added expenses. The rising operating costs are hitting those operators just as base shipping prices on trucking’s spot markets are dropping on wavering freight demand. “It’s coming directly out of my profit,” said Rodney Morine, an independent trucker operating as Morine Trucking & Construction, based in Opelousas, La., who runs his single truck between Louisiana and Georgia. “The customers are trying to get everything back to pre-Covid rates, but fuel is a lot higher now,” Mr. Morine said.

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