The Corner

Trade

Don’t Expect Port Problems to Go Away for the Rest of Biden’s Term

Container ships wait off the coast of the congested Ports of Los Angeles and Long Beach in Long Beach, Calif., October 1, 2021. (Alan Devall/Reuters)

DHL released its ocean-freight market outlook for the next three years. I’ve used DHL reports in the past to cut through any of the talking points that Democrats want to use on supply chains. DHL is a German company with customers everywhere in the world. The company’s officials have little interest in the popularity of Joe Biden and have every reason to tell the truth, as they see it, to their customers.

The outlook goes through 2024, and DHL expects the global markets to just be catching up by then. They project that 2022 will be more of the same from 2021, with demand remaining strong and container imbalances continuing. The labor negotiations on the West Coast could be a particular point of concern. DHL projects that deliveries of new ships will be delayed in 2023 due to lack of shipbuilding capacity and raw materials. Congestion will be more manageable by then, the report says, but prices will still be high. It’s only by 2024 that the new shipping capacity will enter the market, and carriers will be able to rebalance their operations and have acceptable schedule reliability.

But the report calls the U.S. “the bottleneck of global trade.” It points to Los Angeles and Long Beach as global outliers on congestion and waiting times. It blames that on a “lack of rail cars, shortage of truckers and a chassis deficit.” Those longer-term domestic issues would suggest that even as global markets stabilize somewhat by 2024, the U.S. will still be lagging behind.

Of course, the U.S. isn’t the only problem. The report points to China’s energy situation as another potential source of problems for world trade. China has been facing a shortage of coal, the report says, because its factories have consumed more electricity than ever before. The government has resorted to power rationing in much of the heavily populated parts of the country, and “US Companies in China seem to have been more affected by the recent power rationalization.”

None of these problems is easy to solve, and DHL recommends that supply-chain managers secure shipping contracts even if they are expensive. “Capacity wins over price,” the report’s recommendation section says.

As this situation persists and Biden’s approval ratings continue to drop, it’s important that he doesn’t adopt destructive policies just to appear as though he’s “doing something” about the problem. There’s not much the federal government can do to solve these issues. So far Biden’s efforts have been ineffective — and that’s a good thing. We need to hope he doesn’t try anything that would have an effect, because it would almost certainly be negative.

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