L.A., Long Beach ports see progress moving backlogged containers, but bigger issues persist
The ports of Los Angeles and Long Beach, which last year became the focal point of the massive supply-chain meltdown that left store shelves empty and cranked up inflation, have been making much progress in recent months addressing some of the most acute bottlenecks on the docks, but many underlying problems persist.
The backlog of containers with furniture, clothing, electronics and other imports that were piling up at the largest port complex outside Asia last summer and fall has been dwindling. The so-called dwell time a container sits around on average before it gets picked up has fallen by more than half from late October and there are no longer dozens of ships at anchor outside the ports waiting for weeks before they can berth and offload their cargo.
Those encouraging numbers are only part of the story, however, and no one at the ports is declaring victory yet or seeing an end to the supply-chain disruptions caused by the unprecedented volume of imports from Asia. The ships that were waiting outside the ports last year are now spread out across the Pacific Ocean, slow steaming or drifting to avoid a similar traffic jam like the one that put the ports in the national spotlight in the fall and more than doubling the time it takes to reach Southern California.
And although the stacks of containers with imported goods have been shrinking at the ports, the even larger stacks of empty containers that need to be sent back haven't budged much. The unyielding pile-up of more than 100,000 empty containers at the ports in turn creates a headache for truckers who need to offload their empty container before they can pick up a loaded one at the terminals.
"it's a very complex ballet that requires a careful choreography," said Matt Schrap, chief executive officer of the Harbor Trucking Association. "If I can't free up my chassis, I can't pull an import off the terminal."
Much of the recent supply-chain disruptions are connected to the COVID pandemic, which in the past two years has confined many Americans to their homes and has caused a shift in spending habits. Rather than spending money on vacations or going out, people have been buying lots of stuff for their homes, much of which comes by ship from Asia. That surge in imports combined with labor and equipment shortages in the trucking and warehousing industries has put enormous strain on the movement of goods, causing delays and price increases.
The latest COVID-related hiccup at the ports has come from the rapid spread of the Omicron variant in Southern California this month that has temporarily depleted the workforce at the ports by about 10%.
Both Long Beach and Los Angeles set records last year in the number of containers that moved through, predominantly driven by the volume of imports. Gene Seroka, the executive director of the Port of Los Angeles, said at a presentation Thursday that the port was heading for another year of challenges and uncertainty.
One critical element to meet these challenges is better use of data, Seroka said. The port last year started to provide accurate and up-to-the-minute data, such as real-time insights in operational conditions, to help cargo owners and service providers to manage cargo and free up terminal space, he said. But the country's entire logistics network needs to be digitized in order to identify and address supply-chain issues as they happen, according to Seroka.
"Our digital initiatives are a good start because America is years behind other countries in this area," Seroka said. "Data can help us untangle the complexity of the global supply chain."
The container logjams at the Southern California ports last year were part of a broader logistics' implosion away from the ports and across the U.S. supply chain. Shortage of warehouse space and workers, truck chassis and train cars all contributed to containers sitting on the terminals uncollected and ships stranded at anchor.
There isn't enough fluidity in the supply chain to cope with the historical amount of imports that is coming through the ports, said Jim McKenna, chief executive officer of the Pacific Maritime Association, which represents the shipping lines and terminal operators and employs the 8,000 longshore workers at the ports.
"If we are constantly working at 100% capacity, it's impossible to work as efficiently as we would be at 85% capacity," McKenna said.
As of Wednesday morning, there were four ships loaded with containers at berth in the ports that hadn't requested any gangs to unload them because there was no space at their terminals to put the cargo, McKenna said. And that number of ships was comparatively low by recent standards, he said.
Possible new COVID outbreaks in China as well as the Lunar New Year holiday early February may give the West Coast ports some respite and a chance to catch up on their backlogs, but the general picture is that the flow of imports will continue unabated in 2022.
"Our members expect the surge in imports to last at least through the first half of the year and possibly longer," McKenna said. "The volume of inbound containers isn't going to decrease."
The only long-term solution for the terminal operators, given the space constraints at the ports, is to "densify" their operations through automation, according to McKenna. The few terminals that have been automated are about twice as efficient as the ones that haven't, but it is $4-to-$5 billion investment that takes 15 years to implement, he said.
The ports have taken a number of steps to address the worst of the congestion. A "dwell fee" ocean carriers will have to pay for containers sitting on the terminals too long was announced in October but it hasn't been implemented so far because of the 55% reduction in time containers spend on average on the docks. The Port of Los Angeles is now also considering fees and incentives to encourage the shipping lines to remove the empty containers.
"We call on the ocean carriers to be responsive and and evacuate these boxes from our facilities so that we have never to collect a dime," Seroka said at Thursday's presentation.
To reduce the congestion of ships at anchor outside the ports, container vessels are now put on the queueing list when they leave their departure port rather than when they show up in the San Pedro Bay. The ships aren't allowed within a designated Safety and Air Quality Area near the ports until 72 hours before their berthing appointment. That means the vessels are forced to spend days or weeks longer crossing the Pacific, the cost of which ends up getting paid by the consumer.
The ports have also experienced with 24/7 gate operations but so far without much success. Truckers haven't been coming to the ports at the witching hour for various reasons, including federal restrictions on their work hours and the fact that the warehouses where they take their cargo aren't open at night, according to port officials. Also, about half of the appointments slots for truckers during the ports' regular hours go unfilled already, according to the ports.
The problem with the underutilized appointments has to do, again, with truckers' inability to offload their empty containers at the terminals and free up their chassis, according to Schrap. The truckers are mandated to bring back an empty container to pick up a filled one, but even if there is space, terminals will often accept not just any empty container but only those that have the right color for the ocean carriers they work with, Schrap said.
The Bipartisan Infrastructure Bill that Congress passed last year set asides $17 billion for the nation's ports. The Southern California's share of those funds will be needed to upgrade the aging infrastructure, as well as for improved supply-chain data systems, workforce training and zero-emission investments.
Meanwhile, some importers have, for the time, given up on the Southern California ports altogether.
Nathalie Bertat, president of French wine importer Cru Wines LLC in Los Angeles, has rerouted her shipments through the port of New York to avoid the uncertainty and delays to get her containers out of the port of LA last year.
"It's a little bit smoother," Bertat said. "The containers are where they're supposed to be."
Like other importers though, Bertat is feeling the impact of shipping costs that have already doubled from before the pandemic and still go up almost every month. This is forcing her to raise her prices more frequently, which she doesn't know her clients will want to pay.
"If there are no disruptions, I know my cost for a vintage for a 12-month period," she said. "This is the first time that I have had to adjust prices within a vintage."