Despite declining post-Lunar New Year import volumes and canceled vessel sailings, Los Angeles-Long Beach is experiencing only incremental improvements in reducing congestion because now the largest US port complex is being inundated with empty containers returning to Asia.
Truckers say terminal operators could help remedy the situation by assigning more longshoremen to yard and gate operations, but some are actually cutting back on night gates and labor in order to reduce operating costs. Shipping lines have announced about 35 canceled, or blank, sailings through March since many factories in Asia closed for the annual New Year holiday.
“Multiple terminals are being bombarded with empty returns,” said Weston LaBar, CEO of the Harbor Trucking Association (HTA). “Certain terminals are not keeping all of their shifts open because of the drop in import volume,” he said.
Concerns over empty container volumes at Los Angeles-Long Beach have been exacerbated in recent months due to a widening of the imbalance between import and export flows. Imports as a share of total volume spiked at the ports in December, rising to 81.1 percent — 829,397 import TEU versus 193,130 export TEU — compared with an average of 76.5 percent over the previous six months, according to data from PIERS, a sister product of JOC.com within IHS Markit.
Jeremy Nixon, CEO of Ocean Network Express (ONE), told the 2019 TPM Conference in Long Beach the container carrier is "seeing more than 50 percent off the boxes empty [in the westbound trans-Pacific], and that isn't good for the supply chain or the round trip economics of the trade. That is an added cost to the carriers that will have to come back to the import side of the market.
"I'm getting quite concerned in North America about the export situation," he said. "We do want to see more exports coming out of the US."
“The empty returns are a major problem. I believe the biggest problem at the ports right now is those empties,” said Ed DeNike, president of SSA Containers, which operates three terminals in Long Beach. DeNike said, however, that terminals are not shorting labor in the yard. Rather, the problem occurs at the gates because ocean carriers direct hundreds of truckers on short notice to return empty containers to a specific terminal where the vessel is being prepared for departure. Meanwhile, other truckers are arriving with outbound loads, or showing up to take delivery of import loads, and they are caught up in the gate traffic. “It floods the gate and affects all truckers,” he said.
The monthly recording of average truck turn times at the 12 container terminals in Los Angeles-Long Beach shows a big drop from 98 minutes in January to 90 minutes in February. The improved turn times should result in shorter lines and fewer missed appointments due to congestion, but truckers say that is not what they are seeing. “Nothing is too different,” Scott Weiss, vice president of business development at Port Logistics Group, said Monday. The situation has not deteriorated further from the congestion that has been experienced the past four months, but neither has it improved. “It’s more of the same,” he said.
Port sources, which had expected the congestion to ease by early March, are now predicting it will occur by the end of the month. The decline in volumes began last month, with US containerized imports in February dropping 1 percent year over year, according to PIERS, a JOC.com sister company within IHS Markit. However, now that the blank sailings are in full swing, March imports could show an even steeper decline.
The congestion problems began last autumn when warehouses in Southern California were stuffed beyond capacity with an unexpected front-loading of spring merchandise. Carriers in the eastbound Pacific deployed about 34 extra-loader vessels, concentrating the calls in Los Angeles-Long Beach. Retailers and manufacturers were attempting to avoid the threatened 25 percent Trump administration tariffs on more than $200 billion of imports from China that had been scheduled to take effect on Jan. 1. The tariffs have been delayed beyond the second deadline of March 1 as US and Chinese negotiators attempt to reach an end to the trade war. The damage was already done, though, as the inbound containers not only filled up the warehouses, but the overflow containers were parked on chassis throughout Southern California, generating a severe chassis dislocation problem.
Most of the spring merchandise has flowed out of the warehouses to inland destinations, so the chassis are being returned to the marine terminals. The pool of pools website on Monday shows that 39,000 chassis are now positioned at the marine terminals. “That’s gone up from 25,000 four weeks ago,” said Ron Joseph, executive vice president and chief operating officer at Direct ChassisLink, Inc., which along with TRAC Intermodal and Flexi-Van Leasing operates the pool of pools in Southern California.
One of the problems that the entire supply chain faces is that 52 percent of the chassis that enter the port complex with inbound loaded containers are returned to a terminal other than where they entered, Joseph said. This issue occurs because shipping lines tell truckers where to return empty containers. The scattered return of empties causes logistics problems for the entire supply chain and results in some terminals being swamped with empty containers, and the chassis they are occupying, while other terminals experience chassis deficits.
Most carriers today operate in one of three vessel-sharing alliances. The ships operated by two to four different lines in each alliance may call at two or three terminals in the port complex. The vessels are huge, with many having capacities of 10,000 to 14,000 TEU, and they discharge and reload 85-100 percent of the containers in Los Angeles-Long Beach. A carrier will direct the return of empty containers to the terminal where the next vessel from the alliance is preparing to depart. This can, and sometimes does, flood the terminal with more empty containers than it is equipped to handle in a designated window of time, resulting in long truck lines.
Virtually all of the terminals in Los Angeles-Long Beach experienced improved turn times in February, but there is still a wide disparity in individual performance, according to the HTA numbers. Three of the terminals had average turn times of 100 minutes or higher, but most were in the 70-90 minute range; Long Beach Container Terminal, at 51 minutes, and SSA/Matson, at 39 minutes, are considered superior.
However, a number that stubbornly refuses to go down is the 23 percent of the turn times taking two hours or longer — up from 17 percent last summer — and this continues to have a knock-on effect throughout the harbor. LaBar said this unacceptable situation demonstrates that serious work remains in order to return the port complex to fluidity.