U.S. West Coast Ports Situation Highlights Need for Partnership
Congestion at the major U.S. West Coast container ports is not likely to improve significantly anytime soon and could worsen quickly, UTi freight management experts say. Shippers and importers should plan accordingly in consultation with their supply chain partners.
Delays moving cargo through the ports have also begun to constrain already tight airfreight capacity as shippers attempt to shift modes to circumvent the bottlenecks, causing a ripple effect around the world that is impacting virtually everyone attempting to move freight during the final push of the holiday season.
Little relief in sight
Hessel Verhage, who leads UTi's freight forwarding operations in the Americas, says the backlog at the ports stems from a surge in cargo containers from larger incoming vessels combined with shortages at the ports in the equipment, storage, and truck and rail capacity needed to clear the containers.
A large fire at the port of Los Angeles in September and an apparent breakdown in relations between dockworkers and port employers this month have only made things worse. "There is little relief in sight and significant potential downside in the coming weeks and months," Verhage says. "It makes sense to plan for the worst."
While the number of incoming containers should begin to subside as ocean freight enters its traditional slack season before the holidays, record numbers of ships are waiting at anchor outside the ports and the pace could shift from a crawl to a standstill in the event of a strike by union workers or a lockout by terminal operators.
The impact on airfreight
That would also constrict the narrowing airfreight pipeline even more. "Some of our clients have diverted or are looking to divert to air, and peak origins have already experienced price jumps and backlogs," says Jerry Trimarco, Vice President of Global Air for UTi. "Even non-peak origins will see backlogs of airfreight the longer the port congestion continues."
As the strongest airfreight peak season in years reaches its climax, the port delays come at the worst possible time. Trimarco says the impact has been heightened by increased demand for airfreight transportation globally in recent months, particularly transpacific routes as a result of high-tech product launches and the continuing trend toward online shopping.
The ripple effects are being felt as far away as South America and Europe, and "some airlines are now restricting bookings through their hubs and prices have risen to levels not seen in several years," he adds.
While the port crisis has been building since the summer, it reached a peak of intensity this month as the International Longshore and Warehouse Union and the Pacific Maritime Association began to blame each other publicly for exacerbating the delays: "It's been a perfect storm, and the storm could last for some time and even get worse," says Jim Rinchiuso, UTi vice president for ocean freight in the Americas.
More clouds on the horizon
He notes that contract talks began in May between negotiators for dockworkers and those for the shipping lines and terminal operators who employ them. The talks continued quietly even after the labor contract expired in July, but an apparent lack of progress in recent weeks has erupted in slowdowns and finger-pointing.
News reports indicate that the pace of work has stalled at the ports of Seattle-Tacoma, and that only about half as many crane operators as usual have been dispatched to work at the ports of Los Angeles-Long Beach. Combined, the four ports handle about 80 percent of West Coast container traffic.
In response, ocean carriers have begun to omit originally scheduled port calls, and earlier this month, one carrier announced that the slowdown in Seattle required a ship to depart the terminal with containers still onboard.
Harbor truckers have also been hit hard by the slowdown. Rinchiuso notes that under normal conditions, a driver can make up to four turns per day in and out of the ports of Los Angeles-Long Beach. In recent few weeks, however, they have been lucky to make one.
That has led some to get out of the local drayage business altogether, further reducing capacity and leading remaining truckers to introduce congestion surcharges ranging from $50 to $100/hour. Any congestion surcharge imposed by truckers will be treated by UTi as a pure "pass-through" charge, he adds.
The need for dialog
Keeping the lines of communication open will be necessary to resolving the situation, Verhage says. "What's critical is that people keep talking, whether that's the ILWU and the PMA, or carriers and forwarders, or we and our clients," he says.
"This is a highly mechanized and increasingly automated industry, but strong personal relationships still matter. Maintaining a good working partnership with our clients and carriers is more important than ever."
Rinchiuso adds that UTi is working closely with ocean carriers and trucking partners to facilitate the fastest possible movement of client shipments. For cargo not yet booked, UTi encourages shippers and importers to consider alternate routings, scheduling or transportation modes, especially for cargo into or out of the U.S. Midwest.
"Consult with your UTi representative based on your individual needs," he advises. "We have the expertise, visibility and connections to help guide you."
Air Ex-Asia Charters
Companies with urgent shipping needs from Asia to North America can take advantage of two new UTi air charters.
The B747-F charter flights, each with 100+ tons of cargo capacity, will depart Shanghai (PVG) for Chicago (ORD) on 24 November and 1 December. Freight will be available for on-forwarding immediately following customs clearance, which UTi can handle if desired. UTi can also arrange delivery to final destination or clients can arrange for pick up.