Clarification: This story was updated on March 11 to include comments from Ron Joseph, executive vice president and COO of Direct ChassisLink, regarding the availiabilty of chassis.
LONG BEACH, California — Marine terminals in Los Angeles-Long Beach the past four months adjusted their operations to handle an unexpected surge of imports carried by extra-loader vessels, but excessive container dwell times and port congestion that continued into March exposed deeper flaws in the container supply chain.
Vessel on-time performance that sank as low as 40 percent in the eastbound trans-Pacific, import warehouses operating beyond 100 utilization, and continuing chassis shortages demonstrate that no matter how solid a terminal’s operating plan may be, container terminals will be overwhelmed during unexpected volume peaks, two terminal executives told the JOC’s TPM 2019 Conference in Long Beach.
“Most terminals have a template,” said Sean Pierce, president and CEO of Fenix Marine Services. That template includes a space buffer to handle surges, such as during the peak shipping season, and the ability to add shifts and extend gates as needed, but when container dwell times in yards quadruple from three days to more than 12, and truck turn times go from an average of 78 minutes in August to 98 minutes in January, terminals simply can’t flex up quickly enough, he said.
Holiday imports last summer arrived earlier than usual in July, and importers and manufacturers front-loaded spring 2019 merchandise in November and December to escape the Trump administration’s threatened 25 percent tariffs on more than $200 billion of imports from China. Since most of the front-loaded imports entered the US through Los Angeles-Long Beach, terminal utilization levels spiked way above the 80 percent level the industry considers full capacity. “When you’re running at 105-110 percent utilization, you’re well over 80 percent,” said Alan McCorkle, senior vice president, West Coast operations, at Yusen Terminals. During peak utilization periods, terminal operators end up storing containers on every available space in their yards, even those locations not designed for storage, which significantly degrades productivity.
Imports ended 2018 with record numbers for what should have been a slow period following the typical seasonal holiday rush. Laden import containers in December increased 21.6 percent in Los Angeles and 7.9 percent in Long Beach, according to port statistics. Average truck turn times, which had been 78 minutes in August, deteriorated to 90 minutes in December and 98 minutes in January, according to the Harbor Trucking Association. Container dwell times in January averaged 4.32 days, a full day longer than in December and the longest since the Pacific Merchant Shipping Association began measuring dwell times.
In order to handle the unexpected import volumes, carriers deployed 34 extra-loader vessels in addition to their scheduled weekly services. With vessels arriving outside of the pro-forma anticipated by the terminals, they were unable to adequately clear their yards of import loads before the next vessel discharge took place.
Terminal operators adjusted their operations on the fly. Fenix, for example, suspended mandatory appointments for more than four weeks to encourage truckers to take delivery of containers as soon as they were discharged. The company also pushed truckers to bring an empty container to the terminal when picking up an inbound load, which resulted in a 40 percent dual transaction rate, greatly improving trucker productivity, Pierce said.
Terminals usually discharge three-quarters of a vessel’s cargo before starting to load exports and empties, but Yusen relieved the backlog of containers in its yard by loading one export container for each inbound load. “It’s load as you go,” McCorkle said. During the difficult months, Yusen also extended shifts and hired additional labor. “We spent a lot of money,” he said.
The 12 terminal operators in the largest US port complex, which handled 17.5 million TEU last year, did well to avoid total gridlock, but McCorkle and Pierce say the underlying issues restricting terminal operations at North American ports have not been addressed.
Global vessel schedule integrity, for example, fell well below the industry’s already relatively low standards last year. At one point, on-time performance in the eastbound trans-Pacific plunged to 34.2 percent, according to SeaIntelligence Maritime Consulting. Late departures from major Chinese load ports such as Shanghai and Ningbo — due to fog, an unusual number of typhoons, and port congestion — resulted in a slew of late arrivals at North American ports. Jeremy Nixon, global CEO of Ocean Network Express (ONE), said Shanghai was shut down for nine days in 2018, compared with just one day in 2017.
Even if the weather improves, late departures from Asian ports are a fact of life now, said Lars Jensen, CEO and co-founder of SeaIntelligence. As vessel sizes have increased, carriers have reduced the number of weekly sailings from major load ports, so each weather event impacts a higher percentage of eastbound trans-Pacific departures than it used to, Jensen said.
Terminal operators in North America now build late arrivals into their operating template. “If it’s a day, a day and one-half, it’s not a big deal,” McCorkle said. The terminal will work more cranes and labor against the vessel to get it back on schedule. However, when vessels arrive three days late, or later, which happens after weather events in Asia, container dwell times at the West Coast terminals soar and the entire operation is affected, he said.
Lack of chassis availability is another persistent problem. While Los Angeles-Long Beach has improved considerably since the three large chassis providers formed the "pool of pools" in 2015, reducing he number of split moves by developing a pool of interoperable chassis, shortages and dislocations still occur, McCorkle said.
Ron Joseph, executive vice president and COO of Direct ChassisLink, said the pool in Southern California has more than 67,000 chassis, and the out-of-service chassis have been reduced by 31 percent year-over-year to 7 percent by the pool operators. The biggest issue continues to be dislocation. In January, 116,000 containers were returned to a different terminal from where they entered, Joseph said.
Pierce said the pool of pools “has not worked well for us.” Fenix, the former APL terminal in Los Angeles, was in deficit for much of last year. He said an increased level of transparency as to how many chassis are at the marine terminals and off-dock locations is needed, and the port community must come up with a better solution for the 65,000 chassis in Southern California. “How can we manage it in a different way?” Pierce said.
Terminal operators at Los Angeles-Long Beach, all of which have access to on-dock rail, were plagued for months by the late arrivals of westbound trains and the late departures of eastbound trains. Terminal operators like to keep intermodal dwell times from the discharge of the container from the vessel to the departure of the train to three days or less to avoid congestion, but in late 2018 and early 2019 they reported container dwell times at their rail facilities of at least five to seven days, and even longer at some terminals.
Both terminal operators called for the use of technology to improve visibility throughout the supply chain and greater use of data so all port stakeholders can better predict what their labor and equipment needs will be before vessels arrive in port. However, McCorkle said, “We’re not there yet.”
The port portals such as GE Transportation’s Port Optimizer hold potential for greater sharing of shipment data. That joint Port of Los Angeles-GE Transportation project has been under development for more than a year, but it has not yet generated the services and participation needed to deliver on its potential, McCorkle said. “We haven’t noticed any improvement. It’s not fully operational,” he said.