10:05pm 7th June 2022
Gateways stretched thin by record cargoes and congestion say this year’s crush will come weeks early, as importers try to ensure their goods arrive ahead of the fall shopping season
America’s seaports are stretched to their limit just as retailers and manufacturers are set to begin their seasonal rush of importing ahead of the fall and end-of-year holidays.
With shippers seeking to avoid the risk of delays, this year’s peak shipping season is expected to start weeks earlier than usual, at the end of June, just as back-to-school and other seasonal products flood in. That will create high stakes for importers and for the White House as goods arrive against the backdrop of a fragile economy, racing inflation and fresh memories of last year’s massive container-ship backups.
The vessel backlogs at the heart of U.S. supply-chain congestion have receded in some places, but reared up in others, including East Coast ports, while other problems that have rippled across logistics networks remain in place. Warehouses are full. Trucking companies and railroads are short workers and equipment. And container yards at ports are jammed with hundreds of thousands of boxes.
At the nation’s busiest port complex at Los Angeles and Long Beach, Calif., in April, containers sat in yards an average six days before being picked up by truck, and nine days to move by rail, according to the Pacific Merchant Shipping Association.
“When you remember back to the fall of last year—third and fourth quarter—that was our biggest impediment, folks getting their cargo off the docks,” said Gene Seroka, executive director of the Port of Los Angeles. “We’ve got to start digging into this backlog pretty quickly.”
But around the country, officials at gateways say they are better prepared to deal with the coming import surge after more than a year of juggling clogged docks, vessel backups and record import volumes.
Ports note that they have overhauled operations to better cope with congestion before it gets out of hand. They have extended operating hours to handle more containers and set up pop-up container yards to store overflow boxes. There is better and more frequent communication across the supply-chain—between ocean shipping lines, retailers, truckers, warehouse and third-party logistics operators—so they can anticipate and respond to cargo needs, port officials say.
Despite those assurances, shipping customers are wary—and bracing for more delays.
Three-quarters of shipping industry professionals surveyed by Container xChange, an online marketplace for buying and leasing boxes, said this year’s peak season will be as bad or worse than last year’s. Target Corp. executives, during a recent earnings call, forecast $1 billion of higher-than-expected freight expenses this year amid soaring fuel and shipping costs, and said they don’t expect supply-chain pressures to recede until 2023.
But there are signs of a softening in shipping demand. Retailers such as Target and Walmart Inc. are pulling back on some orders as consumer spending shifts from goods to services. Analysts at JPMorgan Chase & Co. in a recent report said they expect restocking to slow, especially in sectors such as home furnishings and electronics that have seen dimming demand.
A slowdown in imports could give ports the breathing room they need.
“I just can’t see a big peak season,” said Craig Grossgart, senior vice president of global ocean freight for Itasca, Ill.-based freight forwarder Seko Logistics. Container shipping line Ocean Network Express, he said, recently increased Seko’s weekly space allocation on vessels by 15%, suggesting there is more room on ships.
Even a gradual increase in container volumes this peak season could present a challenge for ports. Import volumes were up 6.6% at major U.S. ocean gateways during the first quarter compared with the year-ago period, marking the start of a record year, according to research and consulting firm Beacon Economics.
Dozens of container ships are currently waiting to unload at ports on the West, Gulf and East coasts, even though imports have been dampened by a monthslong Covid-19 shutdown in China that depressed output at some of the country’s biggest manufacturing hubs. London-based Drewry Shipping Consultants estimates the expected equivalent of 26 container ships-worth of goods didn’t ship from China in April alone.
The backup of container ships at Los Angeles and Long Beach, which came to symbolize supply-chain congestion last year, on Monday fell to 28 vessels, the lowest since Aug. 2, according to the Marine Exchange of Southern California. That’s down from a high of 109 ships in January—though before the pandemic it was unusual for any ship to have to wait to unload.
Smaller backups have spread to other ports as shippers look for a way around the Southern California congestion.
An average 18 ships a day waited off the coast of the Port of New York and New Jersey last week, according to port data. At the Port of Savannah, Ga., the fourth-largest gateway for seaborne imports, 16 container ships were waiting to unload on Monday, port officials said.
Griff Lynch, executive director of the Georgia Ports Authority, said the Savannah backup was caused by a spike in vessel traffic that coincided with a week in which the port took one of its berths out of operation for a reconstruction project. That suggests there is little slack in cargo operations ahead of the seasonal rush.
Port officials are watching to see if there is a surge of imports once Chinese factories restart production. Gulf and East Coast ports are also bracing for an increase in cargo as shippers divert goods from the West Coast, where monthslong labor talks between dockworkers and cargo-handlers could lead to disruptions.
The talks, which began earlier this month, are expected to run through the summer. Mr. Lynch said East Coast ports are already seeing a combined 10% to 15% bump in cargo headed their way.
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