Container imports at the US’ ten largest ports increased 14.3% year-over-year in July and ocean freight supply chains, now in their second year of extreme dislocation, are threatened by shipping lines suspension of merchant haulage.
The complete erosion of sailing schedule reliability, ships waiting longer to berth, sub-standard port operations and delays unloading containers are among the major issues facing US importers. In fact this is similar globally – but the impact in North America is much greater with the continent predominantly land locked.
Drivers who transport ocean containers in the Midwest and South Central US are quitting in alarming numbers this year because rail terminal congestion has lowered their daily productivity and pay.
Drayage operators at the Port of New York and New Jersey expect capacity to tighten even further in the coming months as cargo volumes show no signs of slowing and drivers exit the business because of the increasing hassles they face pulling containers. In addition there has been a huge surge in demand for domestic haulage, which is seen as a better long term and more rewarding career. Sound familiar?
Approximately 40% of all containerised freight flowing through the United States arrives or departs through Los Angeles and Long Beach ports. With 31 vessels at anchor recently awaiting berths at LA/LB terminals, up from 20 in mid-July and 10 in June, it is clear that the ports are still struggling to address the congestion that has plagued the west coast throughout 2021.
National and regional drayage providers in the Southeast are fully booked, with smaller truck carriers charging premiums to pull import containers from Charleston, Savannah, and Norfolk.
And now shipping lines, many of whom have already stopped supplying chassis over the last 5 years, will no longer accept bookings through to door and those that do still offer it are passing on costs if delivery cannot be arranged within free time. This is the case from both coastal ports and inland rail heads and depots. It’s a major issue.
This is a potentially devastating development, that could see some shippers face massive rent charges, as the typical free period of 5-7 days will be woefully inadequate in the face of a two to three week wait for haulage and dwell times at inland ports exceeding seven weeks.
There’s a shortage of chassis, to move containers, everywhere, reflecting a market that has been tight since at least November 2020.
Low inventories reflect the longer dwell time for a chassis on daily rental, averaging about five days more than it was last year. The longer dwell time stems from a mix of tight warehouse space leaving containers on chassis longer and truckers holding on to chassis for longer periods, with daily rentals kept for up to 20 days.
The biggest drag on haulage productivity is the increasing difficulty truckers have in returning an empty container to the same terminal where they are picking up an import load, with less than 40% of empties returning to the same location.
Once freight is routed inland, a causality dilemma (i.e. chicken-and-egg) follows with chassis scarcity and slow rail service, each causing further impairment to the other.
Add in labour ‘issues’ throughout all phases of the supply chain, most notably COVID-related absences and difficulties finding truck drivers and warehouse workers, and the supply chain storm is near perfect.
The US has been grappling with a chronic lack of drivers for years, but the shortage reached crisis levels when the pandemic sent demand for shipped goods soaring, creating a surge in early retirements, with turnover rates over 90% for large long haul carriers.
August is the beginning of the US ‘peak season’ from Asia, with many retailers advancing their shipments this year to ensure that sufficient inventory will be available during the holidays.
The number of imported TEUs in August is expected to increase 12.6% year-over-year to 2.37 million, which would surpass the record just set in May and a full-year target of 25.9 million TEUs, 17.5% higher year-over-year and another record is anticipated.
On the inland transportation side, many of the supply chain’s problems have been placed on the railroads, but they maintain that a lack of capacity in the terminals is the reason for service issues.
Issues beyond the railroads’ control, like shortages of drivers and chassis are the reasons why trains are being delayed.
Dray capacity is a particular issue, with containers stuck in stacks because the chassis needed to put them into service are not available.
In July, the Union Pacific railroad suspended international container movements from West Coast ports to Chicago for one week to allow the network time to catch up.
In short, it’s everybody’s fault, and nobody’s, because the volume surge has affected every part of the supply chain. There is no single participant – shipping line, railroads, truckers, marine terminals, or cargo owner warehouses and distribution centres – that can clear the bottlenecks and congestion singlehandedly. Every touch point of a container or kilo of cargo is effected with each impacting on the next in the supply chain.
And, along the way, as delays mount, prices rise along the supply chain. Terminal operators start charging for chassis and containers sitting too long in their facilities. Shipping lines keep raising rates and adding surcharges, like congestion fees, while transport operators start charging container storage in their yard, and add driver surcharges, to improve retention.
While congestion and/or disruption is unavoidable at many locations, we work closely with our colleagues in the US, to do everything we can to ease its impact and provide alternative solutions where necessary.
We will continue to monitor and report on this developing situation, to keep you updated as conditions change.
If you have any questions, concerns, or would like any further information regarding the situation in the United States, please don’t hesitate to contact Kevin Lake, who leads our North American operations.
