What Is Going At The Port Of Long Beach With U.S. Container Imports?
On Wednesday October 19, 2022, the Port of Long Beach reported the lowest container imports for the month of September since 2009. It wasn’t too long ago that ships were waiting to be unloaded at the Port of Long Beach on average of seven plus days. This led to a major backup of huge container ships waiting to enter the port. At the same time, big and small retailers waited for deliveries to replenish their warehouse shelves but with no date of arrival in sight. Unfortunately, some had to close their doors as they simply had no merchandise to sell as their goods sat somewhere in the Pacific Ocean. Shipping via the Pacific route had become simply unreliable for businesses that manufacture products or materials in East Asia.
But it’s even happening now with brands looking for gifting supplies who are forced to outsource to China. One such company, We Got Nuts anticipates selling a high volume of gift trays filled with nuts and dried fruit in the upcoming holiday gifting season. Unfortunately, their local supplier here in the United States had run out of stock and were forced to outsource the tray to manufacture overseas. On August 11, 2022 an order was placed for 900 or such trays to a manufacturer of wooden products in China. The pallet was aboard the container ship Matson Kauai and was docked at the Port of Long Beach on October 24, 2022. At this point the goods are sitting somewhere at the port waiting to be picked up by an intermodal shipping company to begin its trek across the United States all the way to Upstate New York. The nut company is hopeful that the wooden trays will get there in time for the upcoming holiday season which is less than a month away.
Many such retailers have their fingers crossed hoping to receive the goods in time for the holiday gifting season but there are others that are opting out of the Pacific route and sending their goods to ports on the East Coast of the United States. Speaking of ports on the East Coast, the Port of New York and New Jersey have moved a record of 843,191 TEU shipping containers this past August. Retailers are simply more comfortable shipping their goods to local ports and having them received there rather than ship to the West Coast where uncertainty is present.
Why Has The Port Of Long Beach Become An Unreliable Container Hub For Shippers?
Labor strikes, worker shortages, aging facilities, and leftist policies have all contributed to inefficient operations. Though no one wants to say the “R” word, September, which is usually a busy month, has been quiet with little to no waiting time for ships to unload. To put things into perspective, on January 9, 2022 there were a total of 109 ships waiting to dock for their shipping containers to be unloaded. Ten months later (just a week ago) that number had dropped to just four ships. That is a huge decrease and signals that shippers are shipping goods to the East Coast as shipping container imports are at an all time high there.
Another possible reason is that we are on the verge of an economical slow down, or better known as the “R” word, recession. Things have become so expensive that people are managing to do without and spending only on items such as food, shelter, and clothing. No more room for expensive gifts like flat screen tvs and drones. People are learning to live with what they have and investing in their homes to make it a bit more comfortable to live for their family.
The only problem with claiming that shipping container imports are down at the Port of Long Beach due to an oncoming economic slowdown, is the fact that imports are at an all time high just across town. Shipping container hubs like the one in Elizabeth, New Jersey are simply not equipped to handle such a volume like the Port of Long Beach and are having a hard time managing the workload. The reason why retailers are shipping their goods to the East Coast is the mere fact that they are closer to local warehouses and don’t have to worry about an intermodal journey across the United States of America.
Surprisingly, the Washington Post just recorded that the U.S. economy has actually grown by 2.6%. This may surprise many Americans who continue to pay high prices at the pump and grocery stores due to inflation. However, compared to where the economy was with people not working early this year, a 2.6% might not be saying much. It’s kind of like the last putter before the engine goes bust. Hopefully, we are not entering a recession as the Federal Reserve of the United States continues to battle inflation by increasing interest rates. It's all a debate and only time will tell what will happen but until then the Port of Long Beach needs to figure out how to direct container traffic back their way.
Hasn't a Labor Strike By The ILWU Been Avoided?
Well I thought so too that a strike by the ILWU (The International Longshore and Warehouse Union) had been avoided. Supposedly, President Biden’s administration was supposed to work with both sides to come to an agreement. The only problem is that it’s four months later and still no agreement has come about. Now acrimony is building amongst the 22,000 longshoremen and the logistics industry is sensing that they will have no choice but to strike. The workers are dealing with rising costs for daily living and wages continue to remain the same. All that was avoided was a strike and to continue to have both parties at the bargaining table. But now it appears that laborers are absolutely livid that they are still working with the same contract that had expired on July 1, 2022 and it appears that they may indeed strike.
Since that is the case shippers are not taking a risk and seeking alternate routes to get their goods imported into the United States. Big box retailers like Amazon, Walmart, and Home Depot have already separated themselves from the crowded waters outside the Port of Long Beach and charter their own vessels from Asia. They then can channel the shipping containers to the closest port near the warehouses that need them most. Amazon is using much smaller ships then the behemoth cargo ships that navigate from the East Coast of Asia to the West Coast of The United States and has much more flexibility as to which ports they can dock at. It was quite an anomaly when the largest ship to ever enter Boston's Conley Terminal docked just last week. It’s not an easy feat to handle such large ships in East Coast ports but something tells me that it wasn’t the first and won’t be the last.
Dealing With Port Congestion Has Always Been a Problem
According to a graphic from CNBC depicting the supply chain in the United States for the month of September 2022, port congestion was at an all time high for ports in New York, New Jersey, Savannah, and Houston. At the Port of Virginia and Oakland, container ship traffic was recorded as being moderate, while at the Port of Long Beach and Seattle it was normal. It is quite apparent that shippers are choosing other routes than the classic Western route due to concern that they simply will not receive their goods on time. The problem is when container shipping traffic comes to a gridlock and there begins to be a build up of vessels that spills over into the Atlantic Ocean. At that point, all goods will revert back to their original western route and the process will slow down again. The only monkey wrench here is the ongoing concern for a potential economic slowdown that will shorten customer demand.
There is clearly an issue at the Port of Long Beach as it is quite noticeable that shippers are choosing other routes. No one wants to ship a container from China at already exceeding costs of $20,000 only to have absolutely no idea when the delivery date will be. There needs to be a major overhaul of one of the main shipping terminals on the West Coast of the United States in regard to policy, labor negotiations, and very importantly modernization. Just look across the ocean as to where these big ships are coming from, as those ports situated in countries like China and Singapore don’t seem to have issues. I am not sure if we have cranes at the ports in the United States that can handle unloading two forty foot containers at one shot. There is a lot to learn from our friends and foes overseas and we might as well implement their modern shipping methods here to assist our supply chain. It may take a decade or so but we need to start somewhere and perhaps that somewhere should be, the Port of Long Beach in California.