By Dominic Pino National Review
In February port congestion seemed to be reaching a plateau. The evidence to support that conclusion was the line of ships waiting for a berth at Los Angeles/Long Beach, which had seen a steep decline for the first time in a while.
Unlike in the past, it seems that was not due to changing the way ships are counted, and the decline is genuine.
In the past few weeks, however, we’ve seen that that decline does not correspond with overall improvements in the supply-chain situation.
Flexport’s Ocean Timeliness Indicator, which counts the number of days between freight leaving an exporter and leaving its port of destination, has hardly budged for transpacific freight. For this week, the indicator shows 109 days for freight going from Asia to the West Coast, only down two days from last week, and still near the record high. For perspective, in 2019, the journey took between 40 and 50 days.
The month of January was the busiest ever for the Port of Los Angeles, and that’s terrific. But comments from the port’s executive director, Gene Seroka, indicate that once containers get on land, there are still significant problems. According to Supply Chain Dive, Seroka said that 55 percent of truck-gate appointments and 30 percent of rail capacity are going unused. That means the port complex overall is nowhere near as efficient as it could be.
The Supply Chain Dive story explains in further detail:
Increased use of the port’s truck gates is hampered by restrictions on empty container returns, chassis and driver hours of service; shipper-dictated pickup times; and limited staffing and cargo availability, said Matt Schrap, CEO of the Harbor Trucking Association. . . .
The 20-mile freight rail expressway that connects the San Pedro Bay ports with inland intermodal facilities has capacity for about 100 trains per day. But the Class-I railroads were running only about 30 trains per day on the corridor as of October, said Michael Leue, CEO of the Alameda Corridor Transportation Authority.
A lack of on-dock rail usage could be a product of downstream supply chain backups, Leue said, such as difficulty getting inventory from inland rail yards to their warehouses, many of which are full or near capacity.
Those persistent inefficiencies mean the port is still unattractive for shippers who have other options. The decline in ships waiting in line at LA/LB has coincided with an increase in ships waiting in line at the Port of Charleston.
Though the 30 ships waiting there are nothing close to the 100+ we saw at the peak of the San Pedro Bay lines, Charleston is a much smaller port, so 30 ships is massive.
It’s not just Charleston, either. Data from Linerlytica show that the combined increase in port congestion at other U.S. ports completely compensates for the decrease in congestion at San Pedro Bay. Containers are simply finding new places to get stuck.
A story from Splash247 quotes the CEO of supply-chain research firm Sea-Intelligence, Alan Murphy, as saying, “There is a 60% increase in the number of vessels on the Asia-North America East Coast trade lane in the coming months, as carriers try to circumnavigate port congestion on the West Coast. This will severely increase pressure on the port infrastructure on the East Coast.”
It will also increase pressure on the Panama Canal, since that’s the route these ships will take to get from Asia to the East Coast. Always a global chokepoint simply because of geography, the canal has been causing problems for the liquefied natural gas (LNG) market recently.
Heavy congestion in the second half of 2020 caused problems all around the world. It generally runs smoother for container ships than it does for LNG vessels, but putting more ships through the Panama Canal than necessary is asking for trouble.
And then, of course, there’s the conflict in Ukraine.
The price of fuel for container ships was already near record highs last week, before Vladimir Putin’s aggression. Given Russia’s status in energy markets, sanctions on the country could lead to an energy shock.
The price of oil is already up near $100 per barrel, the highest it’s been in seven years, which will drive up the price of fuel as well.
Fewer ships waiting for the San Pedro Bay ports is not a sign of success if more ships are waiting everywhere else. That’s what we’re seeing right now. With the ordinary January–February lull in shipping activity not happening this year, supply chains have not had a chance to recover.
Politicians in an election year will have incentive to tell you things are getting better and point to the shorter line off L.A. as evidence. Though that one data point is encouraging, it does not come close to telling the whole story