Thread by @AllVentured

1/ Container ship backlog continues to grow steadily DESPITE the following:

✅ Reduced factory output from rolling blackouts in 🇨🇳
✅ Cancelled liner services and fewer ships calling LA
✅ Biden admin and other govt best attempts to solve

2/ Before congestion can begin easing it must stop getting worse.

Omicron will massively impair port throughput in Jan/Feb as large percentages of port workers will be out sick. Workers weren't keeping up when they were at full staff.

3/ Today's backlog of ships represents more than an entire month of imports.

Whatever portion of throughput is lost in January to omicron will be added to this backlog. Reasonable to expect a 30% slowdown and Backlog to reach nearly 1.5 months of imports by February.

4/ Exacerbating this, Omicron is likely to shift more spending from services to goods as consumers stay in.

Even without the Omicron effect, goods spending has remained elevated and inventories low despite repeated calls for 'normalization' and a shift back to services.

5/ A combination of the usual rush to bring in goods before Chinese New Year and the throughput lost to Omicron makes it likely we see the backlog continue to grow at the current pace reaching 120+ ships by mid-February

6/ Meanwhile retailers are scrambling to add containers in anticipation of the omicron goods demand surge.

After a short 2 week reprieve late February from CNY service interruptions, the fresh onslaught of goods restocking being ordered now begins to hit US ports.

7/ With no evidence of goods spending moderating or port throughput improving, my best guess is that the backlog performs similar to last year peaking in February (120+) and declining by around 30 ships before beginning to grow again off a larger base (90+) through peak season.

8/ It will take both a significant decline in goods spending and an improvement in port throughput to prevent the backlog from continuing to grow during the 2022 peak season.

My bold forecast is that the ship backlog ends 2022 larger than it is now at the beginning

9/ A very real threat to this thesis is that liners have and will continue to redirect more ships to less congested ports instead of LA/LB. Still to be seen how much relief other ports can offer with backlogs now reported at nearly all major US ports.

10/ It is hard for me to envisage a 2022 with LESS congestion than 2021 considering the starting point and negative progress to date.

With more of the fleet tied up as floating warehouses, container space is likely to be even more limited in 2022.

11/ After a nightmare 2021 of supply chain chaos and surprisingly resilient demand, do you think any supply chain manager will risk their job ordering LESS inventory in 2022?

Steady demand into fewer available container slots suggests rates stay well supported.

12/ My final bold prediction: Liner companies post record profits in 2022 after a record 2021. Although I am not the first to make this prediction, the possibility of $ZIM making ANOTHER $38+ in 2022 doesn't seem to be priced in today at $56 🤔🧐 splash247.com/liners-now-on-…

13/ And how could I forget to mention the ILWU (West coast port worker union) contract expires Jul 1. I lived through the nightmare of the last contract negotiation 2014-15 on the shipper side. It is guaranteed to make things worse this time around as well.