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Supply chain woes will continue to plague Canadian metalworking and its customer base into 2022 and possibly beyond, according to Canadian and global supply chain experts.

The Port of Vancouver, Canada’s largest port, hit a grim milestone last week with the number of ships waiting for a birth reaching 60 despite the resumption of rail service, reports the Canadian International Freight Forwarders Association.

CN and CP have reopened the rail lines closed by the recent BC flooding and mudslides – between Kamloops and Vancouver – but they are not yet operating at full capacity. The spillover effect is containerships full of cargo waiting to be unloaded.

The volume of containers leaving Vancouver via rail improved by nearly 250% in the past week, according to FreightWaves' SONAR platform, but remained about 40% lower than before flooding and landslides cut off CN and CP service to the port more than three weeks ago.

The west coast port gridlock gets worse as you head south. Ships are taking twice as long to turn around now than before the pandemic at Los Angeles/Long Beach, one of the world’s largest ports and a major entry point for many North American goods. Even if plans to unload an extra 3,500 containers each week are implemented, the Long Angeles/Long Beach backlog is not likely to clear before 2023, RBC analyst Michael Tran recently told Reuters. That means another year of delays and high freight rates.

About 90% of the world’s merchandise is moved by sea so gridlock issues such as these at major Canadian and US ports are adding to the supply chain headaches caused by the pandemic over the past two years. Securing space on containerships is now viewed by logistics companies as their biggest challenge heading into 2022. A recent poll of 800 logistics companies by Container XChange revealed that 53% of respondents considered finding slots on vessels as their biggest concern, followed by carrier surcharges.

This surge in container shipping rates poses a threat to the global economic recovery. the United Nations agency UNCTAD has already warned.

The cost of shipping a 40-foot container (FEU) unit has come down about 15% from record highs above $11,000 touched in September, according to the Freightos FBX index. But moving the same container, before the pandemic, cost just $1,300 so the recent price drop is little consolation.

In its Review of Maritime Transport for 2021, UNCTAD said that the current surge in container freight rates, if sustained, could increase global import price levels by 11% and consumer price levels by 1.5% between now and 2023.

 

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