Port congestion continues to significantly slow the circulatory movement of ships, containers, and other transport assets including chassis—removing capacity, lengthening transit times, and forcing shipping rates much higher.

As 2022 begins, the container shipping supply chain remains in the deepest crisis it has ever seen. Unwinding the disruption will take months. As the year begins, we remain in the midst of the most severe crisis in container supply chains going back to Malcom McLean, who founded the container shipping industry in the late 1950s. As 2022 begins, the situation is not improving. We would like to be able say that we see signs of the log jam breaking. But frankly, we don’t.

There has been improvement in a few micro situations where very targeted efforts to alleviate certain aspects of supply chain bottlenecks were made. For example, US intermodal rail off the West Coast has seen substantial improvement due to the railroads simply accepting fewer container shipments.

And the number of long-dwelling containers sitting on the docks at LA-Long Beach have been reduced by nearly 50% since October. But as of the beginning of January, there over 100 container ships waiting for a berth off the coast of the LA-Long Beach gateway or slow-steaming en route. In pre- COVID times over many years, that number was much less—actually zero. Ships arrived, berthed, loaded, and unloaded and were on their way.

What changed, very simply, was COVID. During the 2020 lockdown, when consumer spending in the United States swung wildly from services—travel, leisure, and entertainment—to home improvement, and from brick and mortar to e-commerce, the container supply chain was placed under unprecedented strain. E-commerce requires distribution centers, and distribution center capacity was nowhere near prepared. It remains unprepared today. For five to seven years of e-commerce growth has been compressed into a single year. Moreover, stimulus programs enhanced spending power. As a result, for example, US import container volumes in 2021 versus 2019 were up nearly 20%—a far higher rate of growth during the pre-COVID decade.

Exacerbating the crisis in container supply chains is capacity. Ocean carriers and freight forwarders report that there are enough ships and containers to handle even the elevated demand. The problem is that so much of that capacity is idled or circulating more slowly. The result has been to take significant capacity off the table. Estimates are that 10-15% of capacity has been removed due to congestion. This is evident in the freight rates, where spot container freight rates are up three to five times versus just a year ago, depending on the trade lane.

Some headlines over the past couple of weeks have said, “The supply chain crisis is easing.” As 2022 begins, we do not see the evidence for that, at least not in terms of fluidity of container flows. A recurring problem since the pandemic is that the system does not have time to recover before the next shock hits. The system did not have a chance to recover from the six-day Suez closure in March 2021 or the shutdown of the Yantian port in South China in the spring, one of the largest marine terminals in the world. New disruptions such as COVID manufacturing and port closures in China ahead of the approaching Chinese New Year and winter Olympics could further disrupt the system and further delay a return to normal container flow. That is why the 2022 outlook remains one for continuing disruption with no guarantee of a quick return to pre-pandemic system fluidity at least through the first half of the year.