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The United States is now facing two challenges to its supply chain

A heat wave across Europe and China is creating a backlog at ports.

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The backlog of containers carrying German imports is expected to persist at least until the first quarter of 2023.

Meanwhile, due to power cuts, Shanghai’s factories have stopped working.

Even Sichuan, where a lot of lithium is made, has had to close because of power cuts imposed by the government.

At the moment, two of the most important shipping routes used by American businesses are experiencing heavy traffic due to the holiday shipping rush. Heatwave in China has halted major manufacturing, and the resulting backlog of European imports is expected to extend into the first quarter of 2023.

The Central Association of German Seaport Operators (ZDS) and the union verdi have been unable to reach an agreement during their negotiations. The tenth round of talks has begun. Courts have set the last possible date as August 22nd. It’s possible that the port workers will go on strike again if the two sides can’t come to an agreement in this tenth round of negotiations.

Andreas Braun, director of ocean products for Europe, the Middle East, and Africa at Crane Worldwide Logistics, said, “If no compromise will be made, we can expect further strikes which will, even more, worsen the already stressed situation in the Northern Ports.” “Strikes will only make an already bad situation even worse, as congestion, ship schedules, and intermodal operations are all in disarray. Normalcy will not be restored until at least the first quarter of 2023.”

The effects of the deadlocked labor negotiations are visualized in the CNBC Europe Supply Chain Heat map.

U.K. workers are also affected by the ongoing labor unrest. The largest container port in the United Kingdom, Port of Felixstowe, will go on strike on August 21 after failed pay talks. The strike was expected to last until Monday, August 29. Felixstowe handles about 40 percent of all containers entering and leaving the United Kingdom.

Each year, the Port of Felixstowe processes over 4 million TEUs. Many organizations across the United Kingdom would be negatively impacted by a strike at Felixstowe. It is CK Hutchison Holdings of Hong Kong who owns the port.

CNBC used ImportGenius to review the Bills of Lading from July 1 through August 12 and found numerous containers containing Bens Rice from Mars Food, Guinness Beer and Whiskey for Diago, breakfast cereals for Kellogg, medical devices, pork shoulders for Pilgrim’s Pride, and tires for Pirelli Tire.

It will cause major disruption to supply chains across the UK if the strike goes ahead, Braun warned. “Ships’ berthing windows will be pushed back, traffic will build up at terminals and in the outlying depots, and delivery times for both senders and receivers will increase dramatically. It will take at least two to three months for normalcy to return after the one-week strike.”

Supply chain in China is feeling the heat

Government-ordered power cuts in China are causing some factories to stop working for six days because of the country’s record-breaking heat.

Industrial power cuts have been extended from Monday through Saturday across a total of 19 cities and jurisdictions in Sichuan Province, according to a joint announcement released by the provincial economic and information department and State Grid’s Sichuan Electric Power Company.

Worldwide Logistics notified import clients via email that “the sudden orderly power consumption notice has made the supply chain more challenging under the current situation of the COVID -19 epidemic” due to power limit notices for manufacturers in Changzhou, Nanjing, Nantong, and other regions in Jiangsu province.

Some factories in Shanghai have halted production due to power rationing, according to an email from Worldwide Logistics.

Jasmine Wall, a representative for SEKO Logistics, recently told CNBC that “Business in the heavy industries, like aluminum and copper production, is hit the hardest. It also affected some Shanghai office buildings and shopping centers. Power cuts of 12.5 million kilowatts at level C have been in effect in Zhejiang Province since August 6. It is only necessary to work three days a week at some factories in Ningbo, Wenzhou, Yiwu, and Quzhou. As a result, factories in the neighboring provinces of Anhui, Changzhou, Nanjing, and Nantong feel the effects as well.”

On Monday, Hon Hai Technology Group told the Global Times that power outages at a Foxconn facility in Chengdu had minimal effects on output. Apple products, including computers and watches, are produced in part at the Chengdu facility. Even Tesla’s lithium battery supplier, CATL, is feeling the effects. Major global suppliers of lithium are based in Sichuan. Intel also produces in Sichuan, China.

Reports indicate that solar cell manufacturers will also feel the effects of this energy restriction.

Meanwhile, due to regulations requiring Covid testing of truck drivers across the country, freight transport times are longer than usual. Transport times for Chinese exports and raw materials have increased from days to weeks due to testing measures in different cities.

With a seven-day holiday for Golden Week in October, the supply chain cannot afford these hiccups.

Additional cancelled sailings around the holiday are to be expected, reducing available seating.

According to Niels Madsen, VP of Product and Operations at Sea-Intelligence ApS, “the outlook for the coming 10-12 weeks is very close to being back to “normal.”” This is based on the company’s Blank Sailings Tracker, the most recent issue of which found that the number of blanked (cancelled) sailings on major U.S. import trades remained constant. It is expected that the number of blanked sailings on trades out of Asia will increase in weeks 40–42 because “carriers have not yet incorporated (hopefully) planned blanked sailings in connection with up-coming Golden Week ex China.”

Congestion of shipping containers in the United States

This week, ships are more likely to be at anchor, providing a small reprieve, as shown by CNBC’s U.S. Supply Chain Heat Map.

According to Project44’s VP of Supply Chain Insights, the number of ships waiting for a berth on the East Coast has decreased by 18.5% from 70 to 57. “In particular at NY/NJ, the queue has decreased from 15 vessels to 9 vessels over the past week. There are currently 30 ships waiting in line at Savannah, while 23 are anchored in Houston. As we approach peak season, however, it is still too soon to tell if this improvement is a permanent pattern.”

However, at the Port of Oakland, the waiting time for import containers is still in the single digits.

Marine terminals at the Port of Oakland are still clearing out the backlog caused by the trucking protests that closed the Port for a week about a month ago, as explained by Port of Oakland Maritime Director Bryan Brandes. “We need the imports moved off so the lines can restore the services to better serve our exporters and importers, as import dwell still remains a critical issue at the Port.”

From what I can tell from perusing the Bills of Lading, the ports are currently storing a wide variety of goods, including: empty wooden barrels for Robert Mondavi Wine; numerous containers filled with auto parts; Melissa & Doug puzzles; Italian furniture; Italian wine; and flooring.

A persistent issue for ports on both coasts is the length of time empty containers sit idle. The Harbor Trucking Association, a coalition of intermodal carriers serving America’s West Coast Ports, recently wrote to the Federal Maritime Commission to express concern over the 87,000 empty containers that are currently sitting at the Los Angeles and Long Beach ports, near-dock depots for empties, trucker yards, and other sites across Southern California.

When a chassis is used to transport an empty container, it is taken out of service and cannot be used to transport a loaded import or export shipment. Waiting time results in additional fees for both the motor carrier and the customer. The FMC has been looking into allegations that some ocean carriers charge per diem container fees even when the shipper or trucker cannot return the container due to terminal congestion.

Gene Seroka, executive director of the Port of Los Angeles, told CNBC that the port has been moving record amounts of cargo while reducing the backlog of ships by 85% since January.

“Despite the current rail difficulties, our marine terminals are more fluid than they were this time last year,” Seroka said. The improved data and our Port Optimizer have helped us gain deeper insights into our cargo compared to the same time last year.

According to Seroka, there are roughly 34,000 containers sitting idle at Los Angeles’ rail terminals, and he would prefer to see that number drop closer to 9,000. Eight days, up from three days before COVID, are being spent waiting for rail-bound cargo at the docks.

Shippers “must pick up their cargo at inland rail terminals faster than they are today,” Seroka emphasized. This will allow railroads to return more equipment and increase cargo capacity.

Port authorities in New York and New Jersey tell CNBC that empty containers typically sit at the terminal for 30 days. Compared to the 8.2 days it takes to process import containers and the 8.3 days it takes to process export containers, this is a minor inconvenience. The port authority estimates a 210,000-container imbalance dating back to the beginning of 2021.1 Empty shipping containers are piling up near the port.

The empty containers take up valuable real estate at the port, slowing down trade. As shipping delays at ports continue to rise, logistics firms are considering air transport as a backup plan to ensure holiday deliveries.

The potential for additional blank (cancelled) sailing in September and October due to vessel delays on the USEC may create unexpected space and capacity constraints, according to Alan Baer, CEO of OL USA. Because of these cuts, businesses may be compelled to ship their seasonal influx of goods by air rather than sea.

Ocean Freight Head for the Americas at DHL Global Forwarding Goetz Alebrand told CNBC he has never seen so much interest from the air freight industry.

This year, retailers “will do anything in their capacity to ensure that the supply is there when it is needed, for the holiday season,” said Alebrand. “Everyone with a stake in the logistics industry is pulling out all the stops, I’m sure, to make sure Christmas comes true this year. In some cases, planes have been seen to transport goods that weren’t meant to be shipped via air in the first place. Of course shops will try to stock up for the holiday rush. We anticipate a boom in the demand for air travel, particularly from China and Vietnam.”

– Reporting help was provided by Pippa Stevens and Eunice Yoon.

Data for the CNBC Supply Chain Heat Map was provided by Everstream Analytics, an AI and predictive analytics firm; Freightos, the creator of the Freightos Baltic Dry Index; OL USA, a logistics provider; FreightWaves, a supply chain intelligence platform; Blume Global, a supply chain platform; Orient Star Group, a 3PL logistics provider; MarineTraffic, a marine analytics firm; Project44, a maritime visibility data company; and Maritime TransPort, a maritime Freight logistics provider Seko Logistics, satellite imagery and geospatial solutions provider Planet, and shipping and logistics firm Sea-Intelligence ApS.