What is the 'greatest obstacle' to solving supply chain congestion?

3 August 2022

Shipping giant Maersk has blamed recent supply chain congestion on landside bottlenecks but predicts freight normalisation in the fourth quarter of 2022.

The freight and logistics company posted record profits in the second quarter as congestion and supply chain disruption has driven up freight rates. The “greatest obstacle” to solving congestion is bottlenecks in landside operations, it said.

Søren Skou, CEO of Maersk, said: “Congestion really ramped up last year in the US west coast as import volumes jumped up, at the same time as labour supply – longshoremen, truck drivers, warehouse workers – dropped because of Covid-19. We had expected the congestion to ease by the middle of this year as demand would moderate, but as we can see… import volumes into the US remain at very high levels.”

“The situation on the ground is that while congestion has eased a bit on the west coast, congestion has spread to the east coast and to Europe, even though European volumes are essentially in line with pre-pandemic levels. But containers are just not moving off the terminals as fast as we would like to see,” said Skou.

Comments about landside issues come as planned strikes at the UK’s Felixstowe Port next month threaten to bring it to a “standstill”.

Skou said in the US containers were facing dwell times up to four times higher than pre-pandemic.

“Across the east coast, the west coast and Europe we see issues in getting enough labour to drive trucks, and with customers not picking up containers because of full inventories,” Skou explained. “The picture means that a quick resolution of global supply chain issues is increasingly unlikely but we do expect we will see a gradual normalisation from the fourth quarter towards the end of the year as macro headwinds keep demand down and labour markets become less tight.”

Maersk adjusted its expectations of global container volume growth in 2022 to the “lower end”. This was due to the potential of economic uncertainty to reduce demand, though this could also trigger an improvement in congestion, it suggested.

Maersk said supplier delivery times remained “lengthy” and it was uncertain when capacity constraints caused by trucking and warehousing bottlenecks would abate.

The company’s second quarter EBITDA grew to $10.3bn, up from $9.1bn in the first quarter.

Maersk predicted in February this year ocean freight would normalise in the second half of 2022, as labour shortages ended and new shipping capacity became available.

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