After what has seemed like a never-ending peak season, with maritime operators and ports processing record container volumes and managing through unprecedented delays and congestion, there are signs that the historic surge in freight may be starting to moderate. And that’s good news for ports, dray operators, intermodal carriers, and truckers, who have battled to keep products moving through supply chains and onto store shelves with some level of fluidity.
Since mid-2020, consumer spending and surging e-commerce activity have underpinned what by many accounts has been a remarkably quick, strong, and sustained economic recovery. Job creation has reached record levels, while unemployment has dipped below the mid-single digits. And while the emergence of Covid variants and rising inflation remain a concern, they don’t seem to have curtailed consumers’ appetite for goods, with this past peak season setting records for e-commerce sales and marking a strong rebound for retail brick-and-mortar stores.
NOT IN THE CLEAR YET
Yet there are still clouds on the horizon that foreshadow some continued tough sledding ahead as the industry moves through the first half of the new year.
Among those still feeling the pain are drayage truckers on the West Coast. “Cargo is moving, but a lot of it is going on the rail, and we are still drowning in empties,” says Matt Schrap, president of the Long Beach, California-based Harbor Trucking Association, which represents drayage operators serving Long Beach, Los Angeles, Oakland, and the Pacific Northwest ports. Dealing with empty containers “has become the real issue at the end of the day.”
With the sustained surge in cargo, communication and coordination between ship lines, ports, and drayage operators is more challenging than ever, Schrap notes. “We have six different appointment systems across 12 different marine terminals” that drayage truckers have to work with, he says. “Better coordination would be helpful, but every [terminal and ship line] operates so differently it lends itself to inefficiency,” Schrap explains.
Then there are local, regional, and national regulatory pressures, and the emergence of digital brokerage platforms, all of which are impacting the driver experience, their profitability, and truck capacity. “It’s an expensive profession that’s only going to get more so,” Schrap says. “The old joke is [the way] to make a small fortune in trucking is to start with a large one.”
HOPE ON THE HORIZON
Nevertheless, Mario Cordero, executive director at the Port of Long Beach, cites improvements in throughput and shorter wait times for boxes to be unloaded and moved out of the port. In early December, the San Pedro Bay had 67 container vessels at anchor, “less than the 86 we had two weeks ago,” Cordero noted. Cargo has been moving faster out of the terminals, he says, citing a reduction of more than 30% in containers sitting nine days or more. Terminals are running 19 hours a day, striving to get containers and truckers in and out as quickly as possible.
At the Port of Los Angeles, the backlog of containers has dropped to 71,000 from 95,000 in late October, and the numbers continue to improve, noted Gene Seroka, the port’s executive director.
Both Cordero and Seroka say the late-October announcement that the two ports would begin imposing a container dwell fee, essentially a penalty on long-sitting containers, is producing results. Under the temporary penalty program—implementation of which continues to be delayed in response to improving dwell times—ocean carriers could be charged $100 per day for each container left at the terminal for more than nine days while waiting for a truck. The charge for containers awaiting movement by rail comes into play for units sitting on the dock six days or more.
Before the pandemic, the average dwell time for containers awaiting pickup by truck was under four days, with containers headed to trains waiting two days.
Seroka, during an early December press conference, said, “Since we instituted a penalty for long-aging containers, the number of ships at anchor has decreased by more than 40% over a four-week period. We have not collected a nickel of that penalty yet. We put it out there to motivate people, and it has done just that.” In another media interview, the Port of Long Beach’s Cordero said, “I think it’s a fair representation that there’s been progress … [and] vessels at anchor have been diminished.”
Arriving ships to Southern California are allowed to hold at anchor inside a designated 40-mile zone, waiting for a berth to open. In mid-November, local authorities established a new Safety and Air Quality Area (SAQA) that extends 150 miles to the west of the ports and 50 miles to the north and south.
Data compiled by the Marine Exchange of Southern California showed some 44 containerships waiting within the 40-mile zone in early December. Other estimates calculated using Marine Exchange data put the number of containerships waiting outside the SAQA at 50.
Another action taken by the ports in a bid to reduce the container backlog was going to 24/7 container pickup and delivery operations. While in concept it seemed a good idea, in practice not so much. With port operations already running 19 hours a day, “we have had very few takers to date,” said Seroka. “We’ve had some hurdles to overcome. It’s an effort to get this entire orchestra of supply chain players … on the same calendar.”
All of the issues faced by ports—surging cargo volumes, congestion, equipment shortages, delays—are not new, notes Cordero. They’ve just been supercharged by the pandemic and the rapid economic recovery. Cordero cites one clear lesson: “We all understand how [vulnerable] the supply chain was to an unforeseen event.”
SHOCK TO THE SYSTEM
Lawrence Gross, founder and president of Gross Transportation Consulting and a 40-year veteran of the industry, agrees that the economy’s remarkably fast and strong recovery from the pandemic caught everyone by surprise. “We’ve never [before] woken the economy up from a medically induced coma,” he says, comparing this recovery to the years it took the economy to recover after the dot-com bust and then the 2007 housing crash and recession. This time, “things came back fast and hard.” And for maritime operators dealing with a sustained, unprecedented surge in cargo, “once you fall behind, it becomes exponentially harder to catch up. You need more resources just to stay even.”
He also cites the role of the containership lines. “Ocean carriers’ only concern is port to port,” Gross says. “They had zero concern with what happens after they unload the container from the ship. They went from blank [canceled] sailings to extra loaders and dumped all this extra volume into the system.”
Now, with empty containers clogging up the ports, “ocean carriers are not evacuating them [quickly enough] because they are not willing to suboptimize their operations to help solve the problem,” Gross says. Then there is today’s market where ocean carriers, after years of losses, are reporting all-time record profits. “To put it bluntly, I’m not sure the ocean carriers have been incented to change their practices at all,” Gross notes.
BUSINESS AS USUAL
What sometimes gets lost in the accounts of port logjams is that it’s not a universal affliction. For some U.S. ports, it’s been business as usual. “We are thankfully not having the types of problems that they are experiencing on the West Coast and the South Atlantic,” says Beth Rooney, deputy port director for the Port Authority of New York & New Jersey. “When it comes to ships at anchor, we have been seeing onesies and twosies [of ships waiting for a berth]. Year to date, the amount of time ships have waited at anchor is less than a day and a half.”
As for why the relatively short wait times, she says the facility is seeing the benefits of years of strategic expansion and the extra capacity that has given the port authority. “We are seeing about a 21% to 22% increase in cargo year over year, closely aligned with what other gateway ports are seeing,” she notes. “Capacity in the terminals has been [sufficient] to keep the ship traffic flowing,” Rooney says.
Nonetheless, the local port community has faced its share of logistics challenges. Like many ports dealing with surging inbound cargoes and record empties, availability of chassis, or “wheels,” to move containers in and out of the port remains tight. Street dwell times, or the days a container on a chassis sits somewhere outside the port and is not available to pick up the next import, are running 15 to 20 days, well above the normal five- to six-day average, Rooney notes. Inside the port, the normal four days a container would sit on port property has grown to as much as eight days.
In conversations with shippers, Rooney is finding that street dwell time is rising simply because warehouses are full. “They don’t have the capacity to turn the container. Their store shelves are empty, but they cannot fit another spatula into the warehouse,” which, Rooney says, is indicative of issues with available domestic trucking resources—the link in the chain that moves goods from warehouses to stores or e-commerce fulfillment centers.
As for the new year, Rooney doesn’t expect volumes to moderate anytime soon. “Ocean carriers are seeing strong bookings well past the Chinese New Year and well into the second half of 2022. Shippers are saying the same things. They continue to order earlier than they normally would, are ordering more, or both,” Rooney says.
One fact Rooney says has become crystal clear over the past year: the value of the truck driver, and the challenges drivers face in running a successful business. She believes ports and maritime operators need to be much more supportive, communicative, and collaborative.
“The truck driver and the experience that driver has while in the port is a very important piece of the equation that we may not have been as focused on in the past as we needed to be,” Rooney says. “Providing a good experience for that trucker entering and exiting the port is going to be critical to retaining those we have and attracting more to the profession—especially when you consider the volumes we expect in the future.”
Gartner, Inc.