California’s new AB5 labor law, which is forcing Californian owner-operator truckers off the road until they comply with the new definitions of employee and employer, has led to large protests in the terminals of the Port of Oakland. 

Mid-July saw picket lines around employee parking lots encouraging longshore employees to avoid entering the terminal. The owner-operator truck protesters then focused on blocking trucking gates so that port congestion would rise, forcing the port and the state to review the controversial AB5 legislation. 

By July 21, the Oakland International Container Terminal and Trapac announced full-day closures of their truck gates. In talks with port officials, protesters asked the port to pressure California governors to exclude owner-operator truckers from the new legislation, which could see as many as 70,000 of the state’s truckers temporarily taken off of the road, or revoke the legislation entirely. Until California’s governors give a meaningful response, protests could continue for some weeks, forcing significant slowdowns in one of California’s largest container ports.

Container shipping rates on the spot market from Asia to the US East Coast are at their all-time low for 2022 as shippers slow down on orders for Asian imports. The average short-term ocean spot rate from Shanghai to New York-New Jersey peaked in January at $12,155 per FEU, falling to the year’s lowest rate of $9,378 at the beginning of July, according to Xeneta.

The drop in spot rates is mainly due to shippers and retailers who have already received all of their cargo after placing early orders and backfilling inventory to overcome potential supply chain issues. However, the slowdown will not be as noticeable as anticipated, as non-Asian trade to the US East Coast remains strong and shipments continue to divert from the West Coast to the East as longshore labor negotiations continue.

Despite the softer ocean container spot market, contract markets remain stable, and capacity will likely tighten as ordering for back-to-school and holiday seasons begins. And because East Coast ports remain busy due to non-Asian trade and West Coast diversions, current vessel backlogs and trucking congestion in several eastern ports will continue for the foreseeable short term.

The current slowdown is not just caused by a drop in orders, though, as factories throughout Shanghai in China reportedly take longer to reach peak performance after the region’s COVID-19 lockdowns and continued outbreaks.

On average, US stockpiles of goods are growing slowly but steadily by 0.7% unadjusted from April to May. However, stockpiles are not evenly distributed across industries, as retailers and wholesalers attempt to reduce the amount of stock they currently have in the face of changing consumer behavior while manufacturing works to increase the amount of raw material stocks in the US. In May, retail inventories unadjusted for seasonality dropped by $293 million, while manufacturing inventories rose by $12.7 billion.

Due to ongoing supply chain disruptions, US manufacturers now have to increase their US-side inventories to continue manufacturing goods and materials that, before the pandemic, did not require such large inventories for regular and efficient production. According to the US Federal Reserve Board and the US Census Bureau, manufacturer materials and supply inventories are growing faster than their finished good inventories, placing additional strain on US warehousing which is already stretched due to high amounts of retail and wholesale stock.

The lack of warehouse vacancies throughout the US has a ripple effect throughout the supply chain, creating gridlocks in intermodal yards and distribution facilities which then affect ports and ships still at sea.

June saw record high levels of cargo coming into East Coast ports from across the Atlantic, continuing the volume gains seen in May driven by consumer and manufacturing demand.

North Europe and Mediterranean imports jointly rose by 13.8% from May to June and 8.9% year over year to a new June record of 343,651 TEU. This increase starkly contrasts with the first half of 2022, which saw westbound imports from Europe drop by 0.6% compared with 2021’s numbers. The continually high import numbers from May and June are causing further supply chain disruptions, as carrier schedules experience disruptions due to congested ports, terminals struggle to move the increased numbers of imports, and as inland logistics chains struggle to move containers fast enough and overcome long dwell times.

Carriers are warning that the current challenges will likely continue for the rest of the year as Atlantic import volumes combine with diversions from the US West Coast. Maersk has now reset three of its Atlantic services since its vessels could not make up for the lost time, while other carriers are resorting to more blank sailings after approximately 20% of all westbound North Europe to North America sailings arrived more than a day later than scheduled.