Chronic Congestion at Ports of Los Angeles and Long Beach Spreads North to Other U.S. West Coast PortsEverstream Team
The ripple effects of the ongoing congestion issues at the San Pedro Bay Port Complex that had started in the latter half of 2020 continue to affect supply chains in and beyond Southern California as shippers have diverted more and more cargo to other U.S. West Coast ports in recent months in an effort to find less congested entry points into the country. However, these alternative gateways, such as the Port of Oakland, have faced increasing levels of congestion themselves since March 2021.
The San Pedro Bay Port Complex, which comprises the Ports of Los Angeles and Long Beach, continues to report record-breaking container throughputs in 2021. The port of Los Angeles handled 37.4 percent more containers in April 2021 compared to April 2020, marking the ninth consecutive month of year-over-year (YoY) increases and the busiest month of April in its 114-year history. The dramatic increase in volumes continues to add pressure on its overall logistics operations, which have been struggling with a range of issues from high yard utilization and low vessel productivity to long container dwell times and COVID-19 induced labor shortages.
Inbound volumes are expected to remain high into Q3 2021 as the COVID-19 vaccination campaign continues, social distancing restrictions are lifted, and more U.S. businesses resume operations. Even though berth congestion remains critical at the San Pedro Bay Port Complex, other metrics such as yard utilization and dwell times of import containers have recently come down, indicating improving productivity. Organizations seeking to reduce the prolonged waiting times should explore alternative options such as expedited vessel services that use smaller vessels and call at less congested terminals, as well as ocean-to-air conversions out of Asia.
Berth waiting times remain high despite productivity increase
The persistent surge of imports into 2021 has only exacerbated the congestion levels that have plagued the port complex since November 2020, increasing the waiting times for vessels to berth at its terminals from an average of 3-5 days in November to an average of 9-15 days in early March. According to the executive director of the Port of Los Angeles, vessel productivity at the Los Angeles Port is up by 50 percent compared to pre-COVID-19 levels, but the increased productivity continues to be outpaced by the number of incoming container vessels calling at the port. There are on average still 28 ships waiting for a berth outside the port on a daily basis.
While the average waiting times for vessels calling at the Port of Los Angeles and Long Beach have steadily come down from their peaks in early March 2021 to around 6 days into the month of May, the Port of Long Beach has experienced another spike in berth line-up congestion since the latter half of April 2021. Currently, ships are forced to wait for 15 days on average before being able to berth in order for unloading processes to begin.
Shippers divert cargo to Oakland, Seattle to bypass congestion
The ongoing congestion at the San Pedro Bay Port Complex has led to increased attention on nearby ports along the U.S. west coast such as the Port of Oakland, California, and Port of Seattle, Washington. Ocean carriers have started to divert port calls to these gateways in an effort to bypass long waiting times on the transpacific lane from Asia, which has, in turn, resulted in an uptick in congestion at both ports.
As seen in Figure 1, waiting times at the Port of Oakland have been steadily rising since December 2020, and have actually surpassed those at the San Pedro Bay Port Complex since mid-March 2021. As of May 17, waiting times at the Port of Oakland remained at 20 days, up from 1 day at the end of 2020. Further north, the Port of Seattle has also faced increased berth congestion, albeit at less critical levels, with waiting times for ships averaging 4 days since the beginning of May.
Expedited ocean services and air freight remain best options amid continuous surge of imports
Despite waiting times remaining high at the San Pedro Bay Port Complex, other metrics such as yard utilization, container dwell times, and truck turn times indicate an improving situation.
Generally, with 80 percent yard utilization being considered at full capacity, both ports have reported levels exceeding that mark in January and February. However, a decrease has been reported since mid-April, in particular at the Port of Long Beach. In terms of container dwell times, these have come down from 5 days in February to 3.8 days in March at the Port of Los Angeles, while an incentive program for terminals to reduce truck turn times has yielded early results. The Port of Los Angeles recorded truck turn times of 77 minutes at the end of March, a decrease from a high of 88 minutes in December.
Although some metrics have been improving, import volumes remain high and the port complex expects these to increase by 53 percent year-over-year (YoY) in May, and 21 percent in June due to strong demand as businesses reopen and consumer confidence rise. One key factor to watch out for will be whether port operators can ease the congestion before the year-end peak season starts in August 2021. To solve the staffing shortages, both the Port of Los Angeles and Long Beach will likely focus efforts on vaccinations and digitalization to alleviate the ongoing congestion, i.e. widening the scope to include more of the port’s over 100,000 employees to be eligible for vaccination.
In the meantime, shippers seeking to explore alternative ways from Asia into the U.S. west coast have been increasingly relying on expedited vessel services which guarantee equipment, priority loading, discharge, and inland delivery, albeit at higher costs. By using smaller container ships, carriers such as ZIM, Matson, and CMA CGM have been able to call at smaller, less congested terminals. Strong air cargo rates also indicate that many shippers continue to convert ocean shipments to air due to the chronic congestion and uncertainty around the expected time of easing.
The underlying reasons for the U.S. west coast congestion
Record-breaking container movements in March
As seen in Figure 3, a multitude of issues has been causing the ongoing congestion at the San Pedro Bay Port Complex, some of which include the increase in imports and low productivity. Generally, March is considered to be a slow month in terms of inbound merchandise; however, the Port of Long Beach moved 840,387 TEUs in March, thus surpassing its previous “busiest month” record of 815,885 TEUs in December 2020. The record marks a 62.3 percent increase year-over-year (YoY) and is the highest YoY monthly increase at the port. The Port of Los Angeles has also reported the busiest March on record, having moved 957,599 TEUs compared to 449,568 TEUs in March 2020. The port of Los Angeles has since reported its busiest April on record, having moved 946,966 TEUs, marking a 37.4 percent increase YoY. The Port of Long Beach has also recorded its busiest April on record, having moved 746,188 TEUs, a 43.6 percent increase YoY.
Low productivity intensifies port gridlock
The congestion due to the import surge is further exacerbated by labor issues at the Port Complex including those related to longshoremen productivity. Longshore labor is reportedly unable to produce productivity numbers on par with global levels or to keep facilities open for business on a 24/7 basis. According to shipping company Ocean Network Express, berths in Asia work ships on a 24/7 basis, or 168 hours per week, compared to 112 hours per week at Los Angeles and Long Beach Ports. Terminal gates in Asia also operate on a 24/7 basis; however, at the Los Angeles and Long Beach Ports, terminal gates only operate at 88 hours per week. Moreover, for most mega-ship calls, i.e. ship calls greater than 6,000 TEU, moving a container takes about 24 seconds on average at Qingdao, Yantian, and Yangshan Ports, while 48 seconds are needed at Los Angeles, according to data from an IHS Markit Port Performance analysis.