The ports of LA and Long Beach are seeing progress moving backlogged containers, but major problems persist

Edward Petterson

Courthouse Intelligence Service

The ports of Los Angeles and Long Beach, which became the focus of last year’s massive supply chain meltdown that left shelves empty and fueled inflation, have made great strides in recent months in addressing some of the world’s most acute dock shortages , but many underlying problems remain.

The traffic jam of containers with furniture, clothing, electronics and other imports that piled up last summer and autumn at the largest port complex outside Asia is easing. The so-called idle time, which a container spends on average before it is picked up, has fallen by more than half since the end of October and there are no longer dozens of ships at anchor in ports waiting weeks to load and unload their cargo .

These encouraging numbers are only part of the story, however, and no one at the ports is yet declaring victory or seeing an end to the supply chain disruptions being caused by the unprecedented volume of imports from Asia. The ships that waited outside ports last year are now scattered across the Pacific Ocean, steaming or drifting slowly to avoid a backlog similar to that which put ports in the national spotlight last fall, and taking more than twice as long to reach Southern California.

And although container stacks of imported goods in ports are shrinking, the even larger stacks of empty containers that have to be sent back have barely moved. The relentless accumulation of more than 100,000 empty containers at ports, in turn, worries truckers who have to unload their empty container before they can pick up a loaded one at the terminals.

“It’s a very complex ballet that requires careful choreography,” said Matt Schrap, chief executive officer of the Harbor Trucking Association. “If I can’t share my chassis, I can’t pull an import from the terminal.”

Many of the recent supply chain disruptions are related to the COVID pandemic, which has kept many Americans home-bound and changing spending habits for the past two years. Instead of spending money on vacations or going out, people buy many things for their home, many of which come by sea from Asia. This surge in imports, combined with labor and equipment shortages in the freight forwarding and warehousing industry, has put a huge strain on the movement of goods, causing delays and price increases.

The recent COVID-related hiccup in ports is due to the rapid spread of the Omicron variant in Southern California this month, which has temporarily reduced the port workforce by about 10%.

Both Long Beach and Los Angeles set records in the number of containers last year, driven primarily by import volume. Port of Los Angeles executive director Gene Seroka said in a presentation Thursday that the port is heading into another year of challenges and uncertainties.

A critical element in addressing these challenges is making better use of data, Seroka said. The port started providing accurate and up-to-date data such as real-time insights into operating conditions last year to help cargo owners and service providers manage cargo and clear terminal space, he said. However, according to Seroka, the country’s entire logistics network needs to be digitized in order to identify and address supply chain issues as soon as they arise.

“Our digital initiatives are a good start because America is years behind other countries in this area,” Seroka said. “Data can help us unravel the complexities of the global supply chain.”

The container blockades at Southern California ports last year were part of a broader implosion of logistics away from ports and across the US supply chain. The lack of storage space and manpower, truck chassis and wagons contributed to containers being uncollected and ships lying at anchor.

The supply chain isn’t fluid enough to handle the historic volume of imports coming through the ports, said Jim McKenna, chief executive officer of the Pacific Maritime Association, which represents shipping companies and terminal operators and employs the 8,000 dockers at the ports.

“If we’re constantly running at 100% utilization, it’s impossible to be as efficient as we are at 85% utilization,” McKenna said.

As of Wednesday morning, four ships laden with containers were lying at berth at ports that had not called gangs to unload because there was no space at their terminals for the cargo, McKenna said. And that number of ships is comparatively small by recent standards, he said.

Potential new COVID outbreaks in China, as well as the Lunar New Year holiday in early February, could give West Coast ports some breathing space and a chance to catch up, but the general picture is that the flow of imports will continue unabated in 2022.

“Our members expect the increase in imports to continue through at least the first half of the year and possibly longer,” McKenna said. “The volume of incoming containers will not decrease.”

According to McKenna, the only long-term solution for terminal operators, given the limited space available in the ports, is to “densify” their operations through automation. The few terminals that have been automated are about twice as efficient as those that haven’t, but it’s a $4 billion to $5 billion investment that will take 15 years to implement, he said.

Ports have taken a number of measures to address the worst of the congestion. A “duty fee” that shipping companies must pay for containers that spend too much time at terminals was announced in October but has not yet been implemented as the average time containers spend at docks has been reduced by 55%. The Port of Los Angeles is now also considering fees and incentives to encourage shipping companies to move empty containers.

“We are urging shipping companies to respond and evacuate these boxes from our facilities so we never have to collect a dime,” Seroka said at Thursday’s presentation.

To reduce congestion from ships anchored outside ports, container ships are now added to the queue list as they leave their port of departure, rather than when they surface in San Pedro Bay. Ships are not allowed to be in a designated safety and air quality area near the ports until 72 hours before their docking date. That means ships need days or weeks more to cross the Pacific, which ultimately ends up being paid for by the consumer.

Ports have also had experience with 24-hour gate operations, but so far without much success. Truckers don’t come to ports during the witching hour for a variety of reasons, including federal restrictions on their hours of work and the fact that the warehouses they take their cargo to aren’t open at night, according to port officials. In addition, according to the ports, around half of the appointment slots for truckers remain unoccupied during the ports’ regular opening hours.

According to Schrap, the problem with the underutilized dates has to do with the inability of the truckers to unload their empty containers at the terminals and release their chassis. Truckers are required to bring back an empty container to pick up a filled one, but even if there’s space, terminals often don’t accept every empty container, only those that are the right color for the shipping company they work with, Schrap said.

The bipartisan infrastructure bill passed by Congress last year envisages $17 billion for the country’s ports. Southern California’s share of these funds is needed to upgrade aging infrastructure, enhanced supply chain data systems, employee training and zero-emission investments.

Meanwhile, some importers have given up on Southern California ports altogether for the time being.

Nathalie Bertat, president of Los Angeles-based French wine importer Cru Wines LLC, has rerouted her shipments through the Port of New York to avoid the uncertainty and delays of leaving the Port of LA last year.

“It’s a bit smoother,” said Bertat. “The containers are where they should be.”

However, like other importers, Bertat is feeling the impact of shipping costs, which have already doubled since pre-pandemic times and are still increasing almost every month. This forces her to raise her prices more frequently, which she doesn’t know her customers want to pay.

“If there are no breaks, I know my cost for a vintage for a 12-month period,” she said. “This is the first time that I have to adjust the prices within a vintage.”

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