Understanding Current U.S. Port Congestion (and How to Deal With It)

Increased port congestion in the United States and severe delays are becoming more and more widespread in the lead up to Christmas. The Port of Los Angeles, transiting to 24/7 operations, had to move 30% more shipping containers than usual in August this year. Some terminals at the Port of Long Beach are also operating 24 hours and are shipping containers to other states in order to ease the congestion. Both of these ports handle 40% of all cargo containers entering into America.

The situation has become so bad that both ports and the federal government are taking strong measures to curb the congestion. Ports are deciding to impose fines on shipping companies whose containers remain for too long at their terminals. President Biden appointed a ‘port envoy’ as part of the Supply Chain Disruptions Task Force in order to tackle these bottlenecks.

So how did America get to this stage, and is it possible for importers and exporters to adapt? This article will seek to address these questions.

Long Beach Port and Port of Los Angeles container vessel congestion

How COVID-19 caused U.S. port congestion

Putting it simply, the primary factor behind port congestion in Long Beach, Los Angeles and throughout the country is the unparalleled impact of the pandemic. Mario Cordero, Executive Director at the Port of Long Beach said that,

“The root of the problem has been COVID. This goes back to the spring of 2020 when the supply chain was disrupted and continues to be disrupted”

Virus causes fall in demand

When the pandemic began to spread in early 2020, China, Europe, the United States and a whole range of countries imposed strict lockdowns. We saw economies stop, production cease, port activity end (with associated layoffs), and buzzing town squares begin to resemble abandoned villages. The sharp demand for goods disappeared.

The outcome was the world’s largest shipping lines, from Maersk and MSC to Cosco and CMA CGM, cancelling a large number of voyages. The oceans became bare. The routine flow of the products we buy on a daily basis came to an unexpected halt.

The economic downturn was only made worse due to President Trump’s economic trade barriers, as companies were forced to spend thousands of dollars on Chinese tariffs. One U.S-based manufacturer, Digre, had to pay 25% tariffs on parts imported from China to manufacture their loudspeakers.

The company highlighted the catch-22 shippers were experiencing. “You need cash to operate your business,” they said, but “at the same time, you are not getting cash in”.

Lockdowns spur consumerism

But then, what seemed to be out of nowhere, global demand spiked off the charts. Hapag-Lloyd commented that it was the

“strongest increase in demand, following one of the strongest decreases in demand ever”.

A rapid uptick in demand for COVID-19 related products such as hand sanitiser, tissue paper, PPE and face masks placed a huge amount of pressure on international supply chains. In May 2020, for example, the Organisation for Economic Co-operation and Development (OECD) observed that demand for face masks then “might be ten times higher than world production capacity”.

lockdown in New York City

But the virus spread also triggered e-commerce as the dominant marketplace. People weren’t able to go out to dinner or go on holiday, so they turned to eBay, Uber Eats, Amazon and other online stores. In the U.S. alone, consumers spent $791.7 billion on online shopping, up from 32.4% in the previous year. Amazon announced a yearly revenue of $386 billion in 2020 (up from $100 billion in 2019) – a profit totalling 84%. In August 2021, demand for consumer goods was 22% higher compared with February 2020 (pre-pandemic) levels.

Consumerism triggers port rush

The massive increase in consumerism, against the backdrop of lockdowns and port shutdowns, meant that Los Angeles and Long Beach ports, other parts of the U.S. and indeed the world were simply not prepared.

There was a massive rush to purchase products in light of increased Trump tariffs, and this caused an unworkable amount of cargo arriving from China. Average customs filings for Chinese imports surged by 325%.  Long Beach port stated that it handled 312,590 loaded inbound TEU containers in May 2020 (an increase of 7.6% year-on-year, and a colossal uptick of 23.3% from April 2020). Shipping rates rose simultaneously – by 17% in a matter of weeks.

U.S. ports soon found themselves unable to manage. Soon after the huge spark in demand, dwell time for containers at the terminals increased. The Pacific Merchant Shipping Association (PMSA) found that 10% of containers remained at terminals in Long Beach and Los Angeles for five or more days in September 2020, an increase from 6% in July 2020. It was the highest dwell time these ports experienced in 18 months.

The current U.S. situation

The current U.S. shipping crisis can be summarised as a record number of vessels waiting to berth in ports with too many containers, and a lack of port staff able to manage ongoing demand.

Shipping lines are now introducing premiums and congestion surcharges, while ports are introducing penalties on shipping companies for containers spending too long on land.

An emblem of the current crisis is occurring at Long Beach USA and the Port of Los Angeles, together constituting the San Pedro Bay Port Complex, the world’s ninth-largest port complex.

US container port fines

Endless number of vessels waiting to berth

There are a record number of vessels waiting to berth in U.S. ports, as we see photographs of vessel after vessel anchored at sea waiting patiently for their turn.

The recent statistics speak for themselves. In September 2021, a record 56 cargo ships were waiting to enter ports off the coast of California. These ships could be waiting up to four weeks (possibly more) before they can finally dock.

The environmental implications of these diesel-powered vessels can be easily seen. Los Angeles and Long Beach ports, before the backlog, created over 100 tonnes of day of smog. A September 2021 report from the California Air Resources Board says that current congestion has “led to emissions increases from freight-related sources which can negatively impact air quality, especially in communities near the ports”. Increased movement from vessels, trains and trucks has also resulted in emissions increases of 14.5 tonnes per day of nitrogen oxide as of March, according to the Board.

Lack of drivers, equipment and availability

The USA is experiencing a large-scale “labour crunch”. Ports are experiencing staff shortages, and the impact of this has been intensified due to the rising demand for consumer goods.  A truck driver and longshoreman shortage has meant the workload cannot be met with the required number of staff.

“The supply chain is not equipped to handle the amount of cargo that comes into our ports, especially with the lack of trucking,” said Frank Ponce De Leon, a Coast Committeeman of the International Longshore and Warehouse Union (ILWU), Longshore Division.

The sheer number of empty containers piling up at U.S. ports is a testament to the infrastructure’s inability to manage the demand.  “We’ve become a storage facility instead of a port that can outsource these containers as fast as they come in”, according to Danny Miranda, ILWU Local 94 President.

Satellite image of US port congestion

Shipping premiums, congestion surcharges (and port fines)

Due to the colossal amount of port congestion in Long Beach, Los Angeles and along the U.S. West Coast, the Ports are now issuing surcharges to carriers whose cargo containers linger around at their terminals. Taking effect on 1 November 2021, they will initially be charged at USD $100 per container, but there will be daily increases.

Port of Los Angeles and Port of Long Beach trucks

The new policy states that carriers will be charged for each container scheduled to be moved by truck if the containers dwell for 9 days or more. For containers moving by train, carriers will be charged if the container lingers there for 3 days or more.

This is already on top of the already surmounting shipping rates which show no sign of going down.

We outlined more information about the current situation globally in our article on the shipping industry’s capacity crunch.

How shippers can adapt to U.S. port congestion

Despite the ongoing shipping crisis occurring in America and indeed the rest of the world, it’s important that importers and exporters think about ways they can adapt.

Plan ahead

Start thinking now about any cargo you would like to arrive in early 2022 and booking your shipping spaces early.

Don’t wait until the price of shipping comes down (you might be waiting a very long time). Many shipping lines are taking weeks to confirm space, so being on the front foot will best position your business for success.

Work with a professional freight forwarder

Freight forwarders are experts in navigating supply chains and international trade. They can deliver the best quality advice on your shipping strategy to improve your bottom line and make the entire process as seamless as possible.

Our team at ICE Cargo can help position yourself to overcome the harsh impact of U.S. port congestion and ever-escalating shipping costs. From placing bookings in advance to negotiating affordable rates, our team can assist you evert step of the way.

Get in touch with us by leaving a comment below or giving us a call.

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