It’s virtually impossible for beneficial cargo owners (BCOs) and trucking companies to plan their pickup and delivery schedules with any degree of accuracy, thanks to trans-Pacific and trans-Atlantic reliability hitting lows of 35 percent, and rail delays and chassis dislocations at major US ports adding to the supply chain logistics uncertainties BCOs face.
Vessel schedule integrity
Vessel schedule integrity in the major east-west trades has been running a dismal 34 percent to 70 percent this year, due primarily to congestion in origin ports in Asia and Europe, as well as fog delays in Shanghai and winter weather problems earlier this year in Europe. Also, increasing cargo volumes this peak season are playing a role. Vessels are consistently arriving one or two days late at large ports including Los Angeles-Long Beach, New York-New Jersey, Norfolk, Savannah and Charleston gateways, forcing the terminals to assign extra work crews and unload the vessels late into the night.
Despite their best efforts, ports on both coasts are struggling with vessel bunching, congested yards, and container deliveries to truckers that sometimes run a day or two late. Likely the main concern of BCOs is not the day or two delay is receiving cargo, but their inability to precisely plan their truck dispatches and labor needs at their warehouses. Logistical uncertainties add to the angst that some BCOs face due to rising spot market rates. With peak season capacity tightening, carriers are telling US importers the only way to ensure their containers get onto vessels is to pay a higher rate, which is sometimes $100 to $200 above the already inflated peak season rate.
These issues have been in play since the winter weather problems in the trans-Pacific and trans-Atlantic earlier this year threw vessels off schedule, but the summer months have provided no relief. In fact, when other variables such as rail service issues and spot equipment shortages are included, it has been virtually impossible for BCOs and trucking companies to plan their pickup and delivery schedules with any degree of predictability.
Global container capacity increased 4.3 percent through July to 21.7 million TEU, according to IHS Markit data, while total US container trade rose just 2.5 percent year over year in the first half to 17.8 million TEU. At the same time, total Asia-Europe trade slipped 0.2 percent in the first half to 11.7 million TEU, according to data from Container Trade Statistics.
The major consequence – difficulty planning logistics
Nevertheless, BCOs’ biggest concern right now is that logistics planning is becoming extremely difficult. “The biggest problem is unevenness and uncertainty,” Dan Smith, partner at the Tioga Group, said Monday. Even when a vessel arrives on schedule, there’s better than a 50 percent chance that it was preceded by vessels that were two to five days late. Therefore, customers with containers on the on-time vessel can not always make firm pickup times because the terminals are congested with export loads and empties that should have shipped out days before, he said.
Conditions have certainly improved since winter weather compromised vessel schedule integrity in the trans-Pacific and trans-Atlantic trades. According to the latest report from SeaIntel Maritime Analysis, on-time arrivals in the eastbound Pacific improved from 34.2 percent in January/February to 67.3 percent in May/June. On-time performance in the westbound trans-Atlantic improved from 45.7 percent in January/February to 72.3 percent in May/June.
Schedule integrity is also affected by container volumes. On-time performance can be expected to drop when vessels are full in the peak summer-fall months, and US imports this summer are running ahead of recent years, due in part to retailers moving up shipments to get ahead of Trump administration tariffs. July imports were up 8.7 percent over July 2017, according to PIERS, a JOC.com sister product within IHS Markit.
However, actual arrivals at individual ports and terminals often vary based upon where they are in the network vessel rotation from Asia or Europe to the United States. Total Terminals International, the largest terminal operator in Long Beach, has experienced only 32 percent on-time vessel arrivals year to date, Dan Bergman, vice president of operations, said. While this is problematic in itself, if a vessel that was supposed to arrive on Thursday or Friday and begin working immediately arrives on the weekend, the delay is extended for an extra day or two if there is no weekend gate scheduled, he said.
Most delays start in Europe
Port and terminal executives in the United States have said most of the delays start in Asia and Europe. Ports there are struggling to handle 18,000-TEU to 22,000-TEU ships, which congests their entire operations. Since the US-bound ships end up leaving their last port of call in Asia or Europe several days late, their “proforma” schedule bears little resemblance to what is published. “Proforma today is a meaningless term,” one terminal executive said.
Carriers in the past usually made up for lost time by speeding up their vessels on trans-Pacific and trans-Atlantic voyages, but with today’s high fuel costs, which are up 53 percent year over year, that is not an option. “Ocean carriers are doing what they must do to earn a profit, so we deal with slow vessels,” said Ed McCarthy, chief operating officer of the Georgia Ports Authority, where overall vessel on-time performance this year is running 46 percent. Savannah starts with the assumption that vessels will arrive late, so it has a plan in place to expedite cargo-handling. “It’s about servicing the vessels,” he said.
APM Terminals, with large facilities in Los Angeles-Long Beach and New York-New Jersey, has experienced late vessel arrivals of 12 hours to 48 hours, said Thomas Boyd, director of corporate communications. In those situations, “It’s all about clearing this up before the next vessel arrival,” he said.
Yusen Terminals in Los Angeles has four weekly services from Asia. “One is on time, two are one shift off — that won’t kill us — but one service is five-six days late coming in from Shanghai,” said Alan McCorkle, vice president at Yusen Terminals. Yusen can get the ships that are fewer than two days late back on schedule by assigning extra gangs, he said. However, since many services to Los Angeles-Long Beach have vessels of 10,000-TEU capacity or greater, and at least 80 percent of the vessel is worked in Southern California, the three or four days needed to turn the ship pushes it into the following week’s rotation.
Another major choke point: Shanghai
Shanghai, the world’s largest port, handles the largest ships afloat and experiences fog problems in the winter and summer, shipping executives said. “The biggest choke point is Shanghai,” said Sean Pierce, president and CEO of Eagle Marine Services in Los Angeles. When a ship arrives several days late, the terminal operator can assign a couple of extra work gangs and cranes to the ship, but adding more than that will quickly push the terminal into diminishing returns because it will result in yard congestion, he said.
A terminal operator lays out its facility a certain way in order to maximize efficiency, but a large discharge of inbound containers into a yard choked with export loads and empties from previous late-arriving vessels pushes the facility beyond its optimal capacity, and the operational template is compromised. Containers are placed where there is room, not where they are supposed to be to facilitate delivery, and double-handling ensues, Pierce said. A rule of thumb in the industry is that a terminal at 80 percent utilization is operationally full, and productivity plummets beyond 80 percent.
Although Asian ports, especially Shanghai and more recently Ningbo, are most often cited as the source of late arrivals at US ports, European ports handle the same 20,000-TEU vessels that are contributing to delays in Asia. “European ports are congested,” said Jim Newsome, president of the South Carolina Ports Authority. “We just had a ship, which was three days late on the Atlantic, with its first port of call here,” he said. Although it is easy to point to winter and summer fog problems in Shanghai and severe weather in Europe this past winter as contributing to delays, congested ports in Europe and Asia persist despite the weather, he indicated.
Ports and terminal operators recognize that ocean carriers are struggling financially and will cut costs where they can, such as by slow steaming to save on fuel, but they could probably do more in other areas. East Coast ports served via the Panama Canal on all-water services from Asia could offer customers greater predictability if all carriers paid for advanced reservations at the canal, one executive said.
US ports that are the last port out before vessels return to Asia or Europe may also be compromised by delays at previous North American ports because of construction projects, labor, or equipment shortages or missed docking windows due to draft limitations. SSA Marine operates terminals in Seattle, Oakland, and Long Beach. The first call-inbound terminals are not experiencing delays this summer, said Ed DeNike, CEO of SSA Containers, but the Seattle terminal is dealing with late-arriving vessels that call first in Canada because of delays there, he said. Similarly, New York-New Jersey terminals are impacted when ships that work their way up the coast from the South Atlantic experience port delays.
Another delay increaser: railroads
The delays caused by late vessel arrivals can be compounded by rail service issues and equipment shortages. “Rail is still an issue. It’s been a struggle for us for months,” McCorkle said. Yusen Terminals, which is served primarily by Union Pacific (UP), continues to experience excessive dwell times in on-dock rail service due to crew, rail car, and power shortages, he said.
Eagle Marine Service, whose main clients are APL and CMA CGM, measures rail performance by “rail pull delays,” Pierce said. That is the time it takes for the railroad to pull the train after it is released by the terminal operator. During the spring, UP’s average rail pull time was 15 hours, but beginning in week 30 last month, the pull time increased to 20 hours, he said. As with late vessel arrivals, delays in train departures can impact other operations at the terminal, Pierce said.
UP acknowledged in a customer advisory in April that it was experiencing service issues not only at the port but in its network as well, due to equipment and crew shortages and maintenance work in its system. UP announced corrective measures at the time, and said its action plan is working. “As anticipated, Union Pacific is seeing positive traction from our crew hiring efforts and expects to realize benefits from this across our network as we move into and through the peak shipping season,” spokesman Justin Jacobs said.
UP’s latest customer advisory dated July 26 said network velocity is increasing following a bridge fire in New Mexico, a derailment near Tucson, Arizona, and a tunnel collapse in Oregon. While crew supply is still tight, it should improve in this quarter as UP continues to graduate about 200 individuals each month for the next five months, the advisory stated.
Terminal operators are often the first to be criticized by BCOs and truckers when there are delays in delivering cargo, due to vessel arrival and rail issues, even though they have no control over either the carriers or the railroads. Pierce said terminals are increasingly sharing information on vessel and rail metrics with BCOs and truckers, first so they understand where the problems originate. “The terminals did not cause these problems,” he said. Secondly, the terminals share data with their customers and service providers so they can plan their dispatches and warehouse operations based on real metrics. “We’re putting it out there because it is a predictable pattern for the port as a whole,” he said.
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