Crowded California ports indicate trouble for supply chains.
The term supply chain points to one of the most central characteristics of trade. That is, every step in the process affects all of the subsequent steps. Therefore, if part of the proverbial chain is stressed or breaks, the rest of the chain is impeded and possibly broken.
As an unprecedented, record-breaking peak season continues, the biggest test of global supply chain strength is falling on the ports.
According to Freight Waves, October was reported as another record month for the port of Long Beach. For the first time in port history, the long beach port moved over 800,000 twenty-foot equivalent units (TEUs), up 1.4% from September’s record breaking numbers and 17.2% from October of 2019.
This massive influx of containers has caused a bottleneck on one of the busiest trade routes in the world, China to the United States. Not only that, but the ripple effects of Long Beach and other major ports are affecting trade on a global scale.
The Loadstar, a UK based news media platform focusing on the logistics industry, reported that the New Zealand port of Auckland has added many additional congestion-related surcharges. However, the Loadstar also reports that the congestion is not just a result of an influx of containers, but a lack of workers.
The social distancing and capacity guidelines that were put into place as a result of the COVID-19 pandemic has cut down the workforce at a time when ports need all hands on deck. Therefore, ports are both overloaded and understaffed.
The final factor that both contributes to the bottleneck at the ports and is a result of the two other stressors is the current shortage of containers. In fact, Freight Waves also reports that some shipments coming out of Asia are sailing with empty slots despite demand being at a record high. This is the result of a lack of equipment--namely forty foot containers.
The combination of these three issues results in our current strained freight and logistics industry. As the cracks build around the centers of ocean freight, ports, hairline fractures will spread out along the supply lines.
Presently, trucking is the first to be hit.
According to the California Trucking Association (CTA) and Harbour Trucking Association (HTA) the situation at the ports is a gridlock and many trucks are at a near standstill trying to pick up shipments. The result is nearly 10,000-15,000 containers stuck waiting on the docks.
The stranded containers are the result of the already mentioned reduced crews, but aggravated by the shortage of chassis, and a lack of dual transactions, that is the truckers can’t both drop off and pick up in one visit.
Moreover, the average turn time for trucks at terminals has slowly risen since August and is now at an average of 81 minutes. Some truckers, however, have reported waiting over 8 hours for shipments that are already delayed by days and sometimes weeks.
As a result, the trucking associations are now asking terminal operators and shipping lines to put a hold on detention and demurrage charges. The charges are piling up and turning into millions of dollars across the industry.
While some experts think that the importing will slow in the coming months, others are predicting the high volume will continue until the Chinese New Year in February, so it unclear when these issues will be resolved.
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USTR's recent extensions to exclusions of imports impacted by section 301 tariffs protect some items through December 31, 2020.