A significant surge of import shipments at the Ports of Los Angeles and Long Beach has been causing severe congestion over the past two months, overwhelming supply chain operations in Southern California and causing considerable delays for container deliveries. Following the easing of lockdown restrictions in the U.S. in June, the ports have been operating at maximum capacity to process imports, with yard utilization averaging 80-85 percent. In addition to higher volumes, labor and chassis shortages have contributed to the ongoing congestion which is expected to last into at least December 2020.
Southern Californian supply chains overwhelmed by a multitude of factors
Imports from Asia to the Los Angeles-Long Beach port complex reportedly increased by 22 percent in August and September compared to 2019 levels. However, the increase in import volumes has not been matched by higher operating capacity in terms of equipment and space; the ports have also faced some labor shortages amid the COVID-19 pandemic. In addition, delayed vessel arrivals, as well as a chassis shortage in Southern California, which is expected to continue into 2021, have added to the logistical bottleneck.
As a result, terminal operators have been forced to stack containers higher and wider in the container yards, which has delayed the release of import containers from the port complex for the final delivery leg to inland destinations. As yard utilization has averaged above 80 percent, the terminals’ capacity to both store and move containers to distribution centers and rail ramps has been severely disrupted. Furthermore, reduced storage capacity at warehouses is likely to lead to further challenges and extended container and chassis dwell times.
The congestion at the ports has also disrupted trucking operations as turn times for trucks — the time to drop off and pick up a container within the terminal premises — have increased by 33 percent from June to September. The number of trucks needing over two hours to complete the turn has also steadily increased, impacting the overall productivity at the ports. As containers remain in the yard for longer, shippers have faced detention and demurrage surcharges by ocean carriers and marine terminals as well as higher spot rates and surcharges for intermodal shipments by rail carriers.
Ports face record-breaking import surge into December
Figure 1: Weekly volumes at the Port of Los Angeles in TEU. Source: LA Port Signal Dashboard.
The Port of Los Angeles recently announced it had processed 883,625 TEU in September 2020, marking a 13.3 percent increase from 2019, and the busiest September in the port’s 114-year history. As shown in Figure 1, import volumes were expected to further increase in Week 47 (Nov 16-Nov 21) at the Port of Los Angeles, with volumes reaching levels that could be up to 59 percent higher than in 2019. Import volumes at the Port of Long Beach have experienced similar developments since the end of the initial lockdown phase, increasing by 14 percent year-over-year in September.
Both ports are among the busiest container seaports in the United States, with the port of Los Angeles having ranked as the number one container port in the United States for the past 20 years, spanning over 7,500 acres of land and water. The port features cargo terminals including container, automobile, breakbulk, dry and liquid bulk, and warehouse facilities. The port of Long Beach is the second-busiest container seaport spanning 3,200 acres. The port serves as a hub for U.S.-Asia trade, handling trade valued at USD 170 billion annually.
While the ports have reportedly taken some measures to combat the ongoing congestion, such as announcing financial incentives for truckers and carriers and opening near-dock storage yards, the logistical challenges are likely to continue into the month of December and possibly into 2021.
Several carriers including MSC and CMA CGM have already announced emergency intermodal surcharges in anticipation of a persistent increase in import volumes at both ports over the coming weeks. Both carriers will implement a surcharge of USD 350 per container on the transpacific trade lane that move out of the port complex to U.S. inland point shipments, with provision of carrier haulage, pre-carriage, or on-carriage door service. In addition, Hapag-Lloyd will implement an emergency surcharge of USD 180 for all containers requiring truck moves from or to the ports from December 12.
In light of the challenging situation, shippers have increasingly turned to ports further north on the U.S. west coast. The volume of imports from Asia through the Northwest Seaport Alliance, which includes the ports of Seattle and Tacoma, has increased by almost 20 percent from September to October. Both ports have direct rail connections to the Pacific Northwest and Midwest regions, and have experienced significantly less congestion levels in the past months.
Supply chain managers depending on operations at the ports of Los Angeles and Long Beach should take note of the increased risk for disruption, activate contingency plans accordingly, and evaluate the benefits of re-routing shipment through other U.S. container gateways.