Port Congestion & Equipment Imbalance on Both U.S. Coasts
Overwhelmed by record import volumes, 2020's global supply chains are hitting some snags.
As the world prepares for its winter holidays, presents are piling up at ports across the globe and Santa's supply chain elves are scrambling to make sure everyone's gifts arrive on time. Expect some challenges with port congestion and equipment shortages this season, especially on the West and East Coasts, but we'll be the red-nosed reindeer to help guide you through it.
Peak Season Challenges Ahead
Lack of vessel capacity, congestion at the ports, and equipment shortages in Asia and throughout the U.S. are causing logistical headaches for shippers, BCOs, and NVOs alike.
Severe chassis shortages at the Ports of Los Angeles-Long Beach and New York-New Jersey are adding to the congestion, making it difficult for draymen to retrieve boxes and causing downstream effects across the supply chain.
If you find yourself feeling frustrated this season, know you're not alone. The problems are widespread, affecting just about everyone in the industry.
In this article, we'll look at what's causing these supply chain snags, give you some pointers on how to make through 2020's Pandemic Peak Season, and share the latest Port & Rail Updates >>
COVID-Era Consumer Shifts Collide with Inventory Re-Stocking and Holiday Shipping Season
Three major factors are contributing to the current influx in U.S. import volumes:
- Record Inventory Restocking - Consumers wiped out inventories during the first wave of COVID. Now, importers are rushing to re-stock and pad their inventories in case of another shutdown. 90% of consumer-business respondents said their inventory levels were either “too low” or “a little too low,” in an Oct. 14 survey published by Evercore ISI.
- Changes in Consumer Spending Habits - The U.S. is shifting to a "stay-at-home" economy with 42% of the U.S. workforce now working from home full-time according to a recent study by Stanford IEPR. People are spending less on services, clothing and gas, and more on home goods, appliances, COVID-related supplies and essentials.
- eCommerce Boom - People are avoiding stores, so online shopping is booming this season. U.S. consumers spent $21.7 billion online in the first 10 days of the 2020 holiday season alone —a 21% year-over-year jump, according to Adobe Analytics.
All these factors have combined to form quite the un-traditional holiday peak season this year.
Extended Peak Shipping Season
Typically, peak season runs from mid-August to mid-October, with much of the holiday freight having arrived in the U.S. by now. That's not the case in 2020.
“To give you a sense of the demand right now, we are turning away — each week — more cargo than we are carrying,” said steamship line Matson's CEO, Matt Cox, in a recent article on FreightWaves.
The demand is so great, boxes are piling up in Asia, waiting to get on ships. And rolled bookings are more and more common.
“We’re seeing significant congestion in Asia," Cox explained. "Although I’m not talking about Matson, we’re seeing cargo that wants to get on a ship that’s being rolled [pushed back to a subsequent sailing]. And we’re seeing the other international ocean carriers put in additional extra loaders [ships not in the normal service rotation]."
"This is not a typical season," Cox said. "There’s such demand for cargo. Many of our customers can’t keep up with the demand and cargo is back-ordered."
How long will the extended peak season last? The answer remains uncertain, but we expect to see these trends continue through the Lunar New Year (Feb. 12).
Lack of Containers in Asia Stalls Some Shipments
While China was locked down due to COVID-19, there were dozens of "blank" or cancelled sailings coming from Asia. Carriers blank sailings to manage their capacity, ensuring their vessels are fully utilized. So this meant that stores, shelves, and warehouses in the U.S. were not getting restocked.
In addition, all those cancelled sailings meant that empty equipment were not making their way back to Asia in a timely fashion. This is what has caused the record volumes we're seeing today, and the resulting port congestion at the various marine terminals and within the supply chain.
Because the container movement is weighted heavily towards the States, marine terminals in Asia are running out of containers, 40' containers especially. This is causing delays for many U.S. importers who are unable to secure equipment for their bookings, even on premium ocean services. In fact, the problem has gotten so bad, some ships are sailing with empty slots because there is no equipment available for the space.
Record Volumes Cause Box Pile Ups at U.S. Ports
After a lull earlier in the year, U.S. ports are smashing import volume records left and right. For example, the Port of Long Beach broke back-to-back records this quarter, with imports jumping 17.3% in September and 19.4% in October compared to previous years.
This incredible import surge has made it a real challenge to keep freight flowing out of the ports in a timely manner. There's a few things going on here that are contributing to the U.S. port congestion — equipment imbalances, mismatched scheduling, vessel delays and bunching, and COVID-related issues. These issues are most pronounced on the West Coast and East Coast gateways.
Think about it this way: it’s close to lunchtime, and you drive over to your favorite fast food joint… and the drive-thru line is 20 cars deep. Why is this the case?
“Peak season” is the drive-thru at lunch time. Everyone has to eat. If you showed up at 3:00 pm, you’d likely find only one or two cars in line.
It takes time to prepare, package, and deliver the correct food to the correct customer… just like it takes time to prepare, package, and deliver freight to the correct truck driver at the port.
Maybe the restaurant ran out of a certain item and has to scramble to fix it… like how a port may have run out of equipment and has to scramble to bring in additional.
Perhaps an employee called in sick and they weren’t able to get someone in to replace them… like how some ports, warehouses, and trucking companies are dealing with COVID infections among their staff.
For those reasons and more, we are in a crazy period of delays and congestion.
Coping with Congestion at PANYNJ
The massive influx of import cargo straining the system is shining a light on inefficiencies between the many stakeholders who use the Port of New York and New Jersey (PANYNJ). We caught up with Bob Leef, CPG's SVP of Intermodal Operations to learn more about what's going on there.
"We hope the FMC is going to get involved with some of the issues causing the delays," Leef shares. "They are potentially going to come out and say that in the Port of New York and New Jersey, and possibly other places, empty containers must be returned to the place of origin."
"In a port like Savannah or Charleston, where there's only one or two terminals, obviously where you're picking up is where you're returning because there's only one facility," he says. "But in a port like New York, that's a very big deal."
"One of the challenges that we face in NY/NJ is the Alliances," Leef explains. "The way the Alliances are created is each of the steamship lines contributes a vessel or several vessels, and then each vessel that operates that week, that steamship line kinda dictates the marine terminal the vessel calls."
"So in New York, for example, where we have six terminals, it can get very complicated where each weeks vessel is calling, and all three alliances call within the port of NY/NJ. Since the vessel owners pick the marine terminal, in many cases, for a customer, you are picking up loads from one terminal and returning the empties to a different facility within the alliance string. Obviously, that can create all kinds of congestion and problems," he says.
Lack of Double Moves Causes Delays
Truckers prefer to do "double moves", where they go into a terminal with either an empty box or an export, drop off it off, and then come back out with either an empty or an import to go deliver.
It seems simple, and in ports like Savannah or Charleston where there's only one or two terminals, it usually is. But in places like New York and New Jersey, things can get challenging. "Think about it. You've got six different marine terminals, all vying for business. Different depots vying for business. Four different chassis providers. It gets very, very complicated," Leef says.
"So the trucking company picks up the box, brings it to the consignee, the receiver empties it. Now we have to go to Terminal 'A', take the empty box off, then go back over to Terminal 'B' to get load number 2," Leef explains. "Well that's very counter-productive. What's productive is if we go to Terminal 'A', take the empty off, and put the next box on," Bob snaps his fingers, "It's called a double move and then we can deliver that container to the customer. But instead, we have to go to two different terminals to return the empty and pickup the next full import."
Complications can also arise when multiple marine terminals are involved, each having different policies and procedures for when appointments can be made, and when or where empty boxes can be returned.
"Working hours vary at the different terminals which causes truckers to bunch up," says Leef. "Two marine terminals have appointments — one has them all day, one has them half the day. The other four don't have them." These inconsistencies further add to the congestion, delays, and confusion.
Currently, the Port of NY/NJ is running under 50% double moves in the marine terminals. That is very significant. All the stakeholders are working to address the issues, however, each stakeholder has their own agenda, wants and needs.
For example, the steamship lines have pushed back because its a problem for them too — If all the empties get returned to one terminal, but the ship is calling at a different terminal that week, somehow, the empties still need to get to the ship so they can get back to Asia. Right now, the onus is on the trucking community and BCOs to reposition that equipment at their own expense.
Chassis Problem Adds to Congestion
There's also a chassis availability problem which adds to the difficulties, because you can't move the boxes without chassis.
"On Nov. 9, for 40' chassis, the entire Port of NY/NJ started the day with 18, 40' chassis," Leef explained. "Just think for a second what that means. 18 chassis in the entire Port of NY/NJ. That's the magnitude of the problems that we're dealing with here."
Some might say the problem is because importers are sitting on the chassis because they can't unload their cargo fast enough and don't have room in their warehouse. And while this may happen sometimes, the bigger problem is these inefficiencies — vessel bunching, vessels being off schedule, lack of double moves, lack of appointment times, various operating hours, lack of adequate chassis — where the containers just aren't moving in and out of the terminals fast enough.
"It's not a full-service terminal if they say you can only bring in imports, and you can't bring in exports," says Leef. "Many drayage carriers have all their exports sitting on chassis that they want to use to pick up their imports!"
"If we bring a customer 10 containers but we can't get the next 10 out of the port, they aren't going to want to pay us to bobtail to get the empties," says Leef. It makes more sense for the trucker to drop off the next set of containers and take the empties back when they leave. "So we have to wait until we get the next group out to give to them so we can get the empties back," Leef explains, "So it's a cycle."
"We want the steamship lines and marine terminals to drive to operating 24/7, but we need our customers to do the same thing, because what good is it to pull containers out at midnight, if they can't be delivered until 8 the next morning?" said Leef.
Supply Chain Stakeholders Urge FMC to Take Action: Call for Suspension of Demurrage and Detention Fees
Another problem arises with demurrage and detention fees. If the truckers can't get all of the boxes out of the pier on time, or return the empties on time, marine terminal operators (MTOs) and steamship lines charge demurrage and detention (per diem) fees.
A large group of supply chain stakeholders, including Bi-State Motor Carriers (of which CPG is a part), recently penned a letter to the Federal Maritime Commission (FMC) urging them to suspend detention and demurrage fees in the San Pedro Bay port complex and at PANYNJ.
They allege the port complex devolved into "virtual gridlock" after a lack of advanced planning with the steamship lines and other stakeholders created a severe chassis shortage. According to the letter, their members have paid over $150 million so far this year in "unfair and unreasonable demurrage and detention fees" as a result of the congestion.
"The 'Pool of Pools' chassis agreement in Southern California has become massively oversubscribed due to carriers’ misuse of the pool and a lack of asset management by pool operators, leading to the biggest chassis shortage in the history of the San Pedro Bay port complex," the letter stated.
"Chassis shortages have also reached critical mass at the Port of NY/NJ, where dwell times have nearly tripled in recent weeks. Restrictions on empty returns imposed by ocean carrier alliances further exacerbate the problem, with containers redirected at the whim of steamship lines, resulting in additional truck trips for motor carriers as they are forced to reposition equipment to locations other than the point of origin, for no additional compensation, but rather, at their own expense of time and labor," it continues.
Read the full letter to the FMC here (1.3 MB PDF) >>
FMC Announces Investigation into USWC and USEC Congestion
Last week, the US Federal Maritime Commission (FMC) announced a formal investigation into the extreme challenges that exist in our major port gateways of Ports of Los Angeles, Long Beach, and New York/New Jersey. This investigation will look into certain practices of the ocean carriers operating in alliances calling on these ports and the marine terminals to see if certain operational issues related to detention and demurrage, container return, and container availability for US export cargoes are contrary to provisions in the Shipping Act of 1984.
We support the FMC and all supply chain partners for recognizing that these challenges exist and hopefully addressing them so we can build a better supply chain for the future.
Vessel Bunching Adds to Delays
Between all the COVID-related blank sailings and delays, hurricanes, and other inclement weather, over 50% of the vessels have been off schedule in Q3, causing "vessel bunching" at the ports.
"So how do you deal with when Customer A is supposed to have 50 loads come in every week, and the 50 that are coming in on Wednesday don't show up until Friday, but then the Saturday ship shows up and drops another 50?" exclaims Leef. "It's called vessel bunching, and it's another problem that we're all facing."
The two big problem areas are on the West Coast and the East Coast where there are multiple facilities and it's a more complex operation.
"Some people say 'send the vessel to Baltimore.' Well, Baltimore is a smaller port, so if you start dumping the cargo in there, then that's going to become congested too, only because they don't have the space or the infrastructure to handle it."
As winter weather comes along, unfortunately, it will only add to the delays. So be proactive and try to plan ahead whenever possible.
COVID Considerations
It is worth noting that a reduction in congestion is also dependent on COVID-19 recovery. There are labor shortages across the supply chain due to the disease – drivers have left the industry to pursue other work during the pandemic. Some ports are short-staffed due to COVID-19 infection(s), and others are modifying shift timing in order to create social distancing. As cases increase, there is a stronger likelihood of delays as drivers, port employees, and equipment operators may become ill.
Internationally, the monthlong lockdown orders in France and Germany could also affect capacity as we head into Q4 and beyond. Please work closely with us to understand the scheduling and timing of your freight as we work through these challenges to keep your products moving.
How can CPG help get things moving?
Our biggest piece of advice is BE PROACTIVE. The more advanced notice you give us, the better we can react and support your needs. Book as early as possible to avoid delays, and contact us ASAP if things change — we will help ensure timely delivery of your freight.
CPG is working overtime to keep your freight moving, expanding our terminal hours to accommodate extended port hours wherever possible.
Also, remember to return your empty equipment as soon as possible to avoid demurrage and detention fees. Increased availability of equipment will help reduce the congestion and keep freight flowing; however, the import surge is expected to last through Q1 2021.
TL;DR (Too Long Didn't Read)
• Freight is moving slowly because demand is way up, ports are overloaded, and there isn’t enough equipment.
• This is a global impact across all of the supply chain.
• The best thing to do is notify CPG of any changes with your freight needs as early as possible so that we can quickly adjust and accommodate you.
Port & Rail Updates At-A-Glance
Los Angeles / Long Beach
- Containership ONE Apus, which was en route to the Port of Long Beach, may have lost or damaged potentially 1,900 containers after being caught in a storm cell northwest of Hawaii. As of Wednesday, Dec. 2, the vessel is headed towards Japan “with plans to seek a suitable port to right unstable containers, assess any damages and determine the exact numbers of containers lost,” according to FreightWaves.
- Full Asian import surge and peak season are causing congestion which is expected for months. Ports were already operating at peak utilization prior to peak season.
- Congestion limits dray carriers from dual transactions and dray offs which typically help carriers’ productivity.
- Import surge and import warehouses holding onto containers/chassis are main culprit of congestion issues.
- According to a Yahoo Finance interview with Port of Los Angeles Executive Director Gene Seroka, the port is “emphasizing round trip or dual transactions with trucks” to help reduce the congestion, and continued by saying “We're hustling empty containers back at all-time record numbers to catch the next series of imports.”
New York / New Jersey
- Ports are doing their best to restock and shift equipment to help accommodate the backlog of containers. The Port of New York & New Jersey is taking extraordinary measures to keep goods flowing, including adding extra hours of operation, working overtime to keep chassis units roadworthy, and more.
- Gate turn times for truckers have not increased drastically on a daily basis, but are subject to occasional spikes due to bunching of vessel arrivals.
- Terminals have been extending gate / terminal hours when necessary to accommodate import deliveries.
- Other factors currently impacting ops are driver shortages, customer warehouse congestion, and low chassis inventories.
- Clip-on genset shortages continue to impact the inland movement of reefers via rail.
- Rail - Average 7 days dwell from unloading from vessel to transfer to rail ramps.
- See LIVE gate cams at PANYNJ here: https://www.bistatemotorcarriers.com/terminal-gatecams/
Savannah
- Rail - Average 2.5 days dwell from unloading from vessel to ramp.
- Port - Vessel wait time is 48 to 72 hrs. due to port congestion. Recovery to continuing into week 47.
Cincinnati
- Unfortunately, a recent accident on the Brent Spence Bridge has rendered the bridge unfit to drive on by the DOT. Effective Dec. 1, CPG will be implementing a surcharge for work orders received for shipments in and out of Ohio and Kentucky to help cover out of route miles as a result of the bridge being out. More information on the surcharge is available here.
Columbus (Rail)
- Chassis shortage issues causing delays in moving containers.
Norfolk (Rail)
- Average 3 days dwell from unloading from vessel to ramp.
Atlanta (Rail)
- CSX Fairburn is experiencing high congestion due to technical issues with their operating system. At times, drivers have been held up 5+ hours trying to pull equipment out of the rail. Unfortunately, as a result of the ongoing delays we are experiencing, we are implementing a congestion surcharge for all containers originating and terminating CSX Fairborn, effective Dec. 2, 2020. More information on the surcharge is available here.
Mobile (Port)
- 20’ empties are short in Mobile for a majority of SSLs.
Houston (Port)
- No major shortages at this time for Port of Houston.
Dallas (Rail)
- Experiencing a TRAC chassis shortage. There is also a ONE line 40' empty shortage and YM all sizes are limited as well.
Ft. Worth (Rail)
- Currently dealing with a massive increase in volume.
- CPG is prioritizing service to all dedicated customers.
- BNSF seems to finally be on the turn around with their system update, drivers are showing better turnaround times in/out.
- Equipment conditions/quality will always be a concern, more chassis are being brought in daily to alleviate the situation in Haslet.