Maritime players, from containership lines to port operators, drayage truckers, third-party logistics companies, warehouse operators, and even inland U.S. intermodal rail services, found the first half of 2021 to be a titanic struggle as an overwhelming and sustained surge of ocean cargo threw transportation networks and supply chains into disarray.
Ports became jammed as they processed record container volumes. At one point earlier this year, the ports of Long Beach and Los Angeles had in excess of 35 ships at anchor in San Pedro Bay, waiting for a berth. Turn times for drayage operators to move containers out of ports, once typically 24–48 hours, stretched out to seven days or more. Warehouses, already chock full of goods, began holding onto loaded containers on their chassis far beyond the contracted “free time,” parking them on-site or nearby until warehouse space became available—and exacerbating an already acute shortage of empty containers and chassis available for return.
Then, the giant Ever Given containership decided to go sideways in the Suez Canal, blocking hundreds of ships and delaying tens of thousands of containers loaded with all manner of goods. That created a backlog that took weeks to clear and caused a ripple effect from Shanghai to Rotterdam.
And Murphy’s Law wasn’t done yet.
In late May and June, the Port of Yantian—China’s largest and the gateway to the Pearl River Delta manufacturing center—suffered a renewed surge of Covid-19 cases. That closed the facility’s west port operations and caused the east port to scale back to 30% of capacity. And while the port resumed full operations near the end of June, the ensuing pileup of ships and containers disrupted supply chains from China to the U.S. to Europe.
“It’s been a buildup of one problem on top of another, and then the wheels truly came off the carriage,” observes Lars Jensen, CEO of the research and consulting firm Vespucci Maritime (formerly SeaIntelligence Consulting). He describes a convergence of unprecedented operational and economic developments creating bottlenecks around the globe—which he projects will take months to clean up. “It’s a game of musical chairs. There is not enough capacity in the world to move all the cargo people want to move. That’s why rates have skyrocketed. There is no short-term respite in sight.”
John Janson is senior director of global logistics for SanMar Corp., an Issaquah, Washington-based supplier of wholesale apparel, bags, and caps. A top 100 U.S importer, SanMar books thousands of import container shipments annually and operates some eight major distribution centers in the U.S.
“We have never worked so hard to get the bookings we have or paid so much for those bookings—ever,” says Janson, a three-decade logistics veteran. “And while you would expect to get capacity when you’re paying the kind of rates out there today, that’s just not the case,” he observes, adding that despite offering more money and longer contracts, his ocean carriers still are not living up to their “MQCs” or minimum quantity commitments.
All that has caused him to look for alternatives—and get creative. Most of his Asia-origin ocean cargo comes into the Pacific Northwest. Working with freight forwarder Ceva Logistics, he found a bulk cargo vessel calling on Longview, Washington, that had extra space available. Through the forwarder, he was able to book 20 containers on that ship. “In this case, Ceva and [ship operator] CMA CGM put together a very creative solution,” he notes.
Whether it’s booking space with container lines, helping suppliers obtain empty containers at origin, persistent port congestion, finding truckers and securing drayage resources, and even getting slots on eastbound intermodal trains out of the Pacific Northwest, “never in my career have I seen all facets of transportation under this kind of pressure at one time,” Janson says. “We have always tried to be a shipper of choice and a good steward of the carrier’s assets,” he adds. “That [helps make] us a desirable customer. We continue to play that card as much as we can.”
It’s not just the wholesalers; the nation’s retailers are feeling the heat as well—and raising the alarm. In a June 14 letter to President Joseph R. Biden, National Retail Federation (NRF) President and CEO Matthew W. Shay wrote: “The supply chain disruption issues, especially the congestion affecting our key maritime ports, are causing significant challenges for America’s retailers. The … issues have not only added days and weeks to our supply chain but have led to inventory shortages.”
In his letter, Shay also warned of the economic consequences of the disruptions, noting that all of the respondents to a recent NRF member survey had experienced cost increases, with a majority (75%) saying they would pass along some of the costs to consumers.
PULLING OUT ALL THE STOPS
Meanwhile, the nation’s ports are pulling out all the stops to get record volumes of freight off ships, onto trucks and trains, and out to shippers.
“In the month of May, we processed more than 1 million TEUs (20-foot equivalent units)—an all-time record for any port in the Western Hemisphere,” says Gene Seroka, executive director for the Port of Los Angeles. The port in June was welcoming 15 container vessels a day, up from a pre-pandemic average of 10. He cites vessel productivity up 50% from pre-Covid levels—well above any previous measure. “Throughput is the highest it’s ever been,” he notes.
Congestion remains an issue, with dwell times in some cases increasing two- and threefold. He implores the Southern California import community to pick up their containers in timely fashion—and promptly return the empties and their chassis. “If there is no room on the ground because [shippers] cannot move containers out [to warehouses], that’s how ships sit. It’s all intertwined,” Seroka says.
NEW YORK STATE OF MIND
In Beth Rooney’s 29 years in the maritime business, she’s seen just about everything. Until this year. “We are 17% YTD over 2019, and that was a record year,” notes the deputy director of the port department for The Port Authority of New York & New Jersey. “If you annualize what we have done over the last four months [February–May of 2021], that’s what we projected [to be handling] for 2026–27—five years down the line.”
Nevertheless, the port and its partners have stepped up, Rooney says. “We have not had any backup of ships at anchor waiting to get into the port. Average time at anchorage has been less than a day.”
On the land side, the issues have primarily been with empty containers—and getting them back. Ideally, the port wants truckers to do a “drop and pick,” which is dropping off an empty or export container and picking up a loaded container before leaving—a “double move” at the same terminal. Or a live load, where they come in with an empty chassis, get a container loaded, and depart.
But that doesn’t always happen. Too often, the trucker drops a load at one terminal but doesn’t have another to pick up. With the advent of ship alliances, the ship line might want the trucker to pick up a container at Terminal A and drop off the empty at Terminal C. Or, the trucker has no on-port pickup and has to return to the warehouse with an empty chassis and get another empty or export box.
“So trucker productivity is down. Then there are times when the ocean carrier says, ‘I really don’t have anyplace for you to bring that empty, keep it for a day,’” Rooney explains. “Now, the trucker has no place to bring it, does not have a set of wheels to get another container because the empty it was going to return still has the wheels on it.” All of that increases dwell time and hampers both port throughput and the number of efficient moves a trucker can do in a day. And it presents a huge area for improvement.
Two other issues she cites are vessel schedule reliability and longer dwell times for intermodal cars in Chicago. “That’s limited how many Chicago boxes we can send in a day,” whereas “off-schedule ships lead to vessel bunching and delays everywhere in the supply chain.”
“We’ve had our challenges and we own those challenges,” she says, noting that through all the pressure and turmoil of the past year, she’s extremely proud of how the NY-NJ port community has come together and risen to the challenges.
UNPRECEDENTED VOLUMES
It’s a similar story over at the Port of Long Beach. Executive Director Mario Cordero notes that the port’s recent infrastructure improvements have paid dividends and made the port “big ship ready,” able to accommodate and efficiently process the largest 19,000-plus TEU vessels. However, the surging volume through 2021 “is beyond anything we may have forecasted. Never in our lifetime have we experienced the disruption we’ve seen in the past couple of years,” he notes.
Like Rooney, Cordero says that one of the biggest impediments to improving cargo flow—that is, getting containers off ships and out of the port efficiently—is a lack of equipment, specifically railcars, due to congestion and delay issues major rail providers are experiencing in Chicago. “Rail movement at the Port of Long Beach is a priority, and any time they [rail operators] don’t have railcars available to move containers inland, that becomes problematic.”
The congestion issues in Chicago have become so acute, that in mid-July, the Union Pacific Railroad temporarily suspended all of its intermodal train service from the four West Coast ports of Los Angeles, Long Beach, Oakland, and Tacoma into Chicago in an effort to relieve the backlog of boxes at Chicago-area terminals. The Burlington Northern Santa Fe Railway took similar action, essentially “rationing” space temporarily on eastbound intermodal trains from Los Angeles and Long Beach into Chicago, citing the surge of incoming boxes at destination, and challenges from congestion and processing delays.
The good news, Cordero says, is that the port’s metrics overall are improving, in dwell and truck times, and in ships at anchor. In late June, the port “had 13 vessels at anchor, much improved from months back when we had 30, 40 ships at anchor.”
MEANWHILE, BACK AT SEA …
As for the vessels themselves, maritime operators are still struggling to deal with the “surge of 2021,” notes Tom Donahue, executive vice president and CEO of U.S. operations for freight forwarder Aeronet Worldwide. The problem lies not so much with the fleets themselves as with port operations, he explains. After widespread sailing cancellations last year when cargo volumes fell off the deep end, all ships are now back in play, he says. But bunching at ports and congestion within them is severely delaying containers from reaching consignees, sometimes for days or weeks, he notes.
“[Vessel] service is terrible; transit time is a mess,” Donahue says. “Vessels used to be unloaded in 24–48 hours. Now, the average nationwide is three to five days to get a ship unloaded and out of the port.”
As peak season kicks into full gear, shippers have to lock up capacity now or risk their goods sitting on the dock, notes Donahue. His advice for shippers: Make sure your forecasts are accurate. Get them to your logistics provider as early as possible. If you want your goods to arrive in October, go back six weeks and get your bookings in place then. “And expect to pay more than you ever have before. A container from Asia was $1,500 a year ago. Now, China to the West Coast, all in, is hitting $10,000 or more.”
Gartner, Inc.