Rising volumes slowing port flow on East, Gulf coasts

Rising volumes slowing port flow on East, Gulf coasts

Containerized imports into the US East and Gulf coasts rose another 6.1 percent and 21.3 percent, respectively, in the first five months of 2022. Photo credit: Shutterstock.com.

US East and Gulf coast ports are using any and all means available to increase their efficiency in anticipation of a sustained summer volume surge that could exacerbate a backlog of vessels already queuing up outside their harbors, including tapping nearby land to store imports and empty containers.

Thanks to consumer demand that has continued in 2022 despite warnings of inflation and a shift to services spending, total US imports have grown another 3 percent in the first five months of the year after rising 13.1 percent for the full year in 2021, according to PIERS, a sister product of JOC.com within IHS Markit, now part of S&P Global. That growth has been uneven, however, as a bustling trans-Atlantic trade and shippers diverting cargo away from the West Coast pushed volumes through the East and Gulf coasts up 6.1 percent and 21.3 percent, respectively, while West Coast imports slipped 3.5 percent.

Some of this growth can be attributed to normal seasonality; retailers and other importers tend to send non-time sensitive holiday goods to the East Coast earlier in the summer and use the West Coast for expedited shipments as they get closer to the holiday season. The difference this year is that imports to the East Coast began arriving even earlier as shippers sought to avoid potential disruption related to West Coast longshore labor contract negotiations, which began in May.

“We’re handling a full 33 percent more containers through our terminals than we were in the same period in 2019,” Bethann Rooney, port director at the Port Authority of New York and New Jersey (PANYNJ), said during a July 1 media briefing. “That staggering increase in overall volume gives a picture of what all of the various nodes and links in the supply chain are trying to absorb.

“All this was without the benefit of knowing that this volume is here to stay and, therefore, as service providers and partners in the supply chain, we need to make the investment in order to handle this staggering increase in activity,” she added.

Partly as a result, an average of 17 container ships sat anchored outside the Port of New York and New Jersey during the last week of June, after reaching a record 21 vessels on June 20, according to PANYNJ data.

“A total of 107 container ships needed to wait at some period in the month of June in order to get into the Port of New York and New Jersey, and they waited an average of 4.5 days,” said Rooney. “Year to date, they’re waiting an average of 3.8 days,” compared with zero prior to the COVID-19 pandemic and resulting surge in consumer imports.

Rooney called the backlog “concerning,” but was quick to point out that the increasing number of vessels being forced to wait for a berth — and longer wait times — “is directly correlated to what is going on on the land side,” pointing to similar vessel queues in the South Atlantic.

Although there were no vessels anchored outside the ports of Virginia, Charleston, or Baltimore at the end of June, there were more than 30 waiting to berth in Savannah, according to the Georgia Ports Authority (GPA), a record high.

Griff Lynch, CEO of the GPA, said higher-than-expected import volumes will likely exacerbate the vessel backlog in the coming months. According to GPA forecasts, there are roughly 255,000 containers “on the water” headed for Savannah, up from 210,000 last fall, the last time there were so many ships waiting to berth, and 170,000 in January 2021.

“Even as recently as a month ago, we never envisioned the amount of volume that is en route to Savannah,” Lynch told JOC.com in a June 30 interview.

In Houston, above-average growth in import volumes — up 25 percent year over year through May — pushed the number of vessels at anchor outside the largest Gulf Coast port to 16 as of June 27, up from eight in mid-May, according to port authority data. Starting June 4, the port’s two container terminals have been operating Saturday gates to handle higher volumes.

According to the latest forecast from the National Retail Federation, low- to mid-single-digit year-over-year percentage growth in overall US import volumes will continue through the 2022 peak season, which means the accompanying port and inland congestion will likely persist through at least the end of the year.

A consistent culprit

Port officials and terminal operators across the country have attributed the chronic congestion and resulting vessel backlogs primarily to longer dwell times for import boxes caused by bottlenecks at jam-packed warehouses and inland rail ramps. Imports that are sitting for longer periods on the terminals take up space that would otherwise be used for unloading arriving volumes, as well as storing exports and empty containers.

“We continue to see long-dwelling [import] containers in the terminals, with dwell times that are at least twice as long as the pre-pandemic levels, and in some terminals, pushing three times as long,” Rooney said. “There are still hundreds of containers that are dwelling long beyond those averages of two to three times the norm, which is three to four days, and shippers that have chosen to use the terminals as warehouses.”

Dwell times for import containers at New York and New Jersey terminals ranged from eight to 14 days during the second quarter, up from five to seven days in the same three-month period last year. In Savannah, average import dwell times reached 8.8 days in June, up from 8.5 days in May and 8.4 days in June 2021 and double the pre-pandemic average of four to five days.

Import dwells in Houston had fallen to six days at the end of June from 6.3 days as of the end of May but were still well above the four-day average port officials say is needed to maintain cargo flow. What is more, exports ready to be loaded were sitting at the port for 10.4 days, up from 9.5 days at the end of May and well above the port’s goal of a seven-day dwell, owing to strong agricultural exports such as cotton and increasing resin export volumes.

In addition, many importers have been shipping back-to-school and even holiday goods months ahead of the typical August–October peak season to avoid congestion and mitigate the risk of further disruption on the West Coast stemming from ongoing longshore labor contract negotiations.

“In many cases, Christmas products have already arrived in the port, and we typically would not see them until later in July, and the August–early September timeframe,” said Rooney.

For the large importers that have been front-loading cargo, the vessel backlogs and delays will be less costly than last year, but many of them now have either too much product or too much of the wrong inventory clogging their warehouses and distribution centers.

“We’ve had a few frustrated customers, but no customers who were up in arms about the delays, so it’s very different than last year,” Ben Banks, vice president of drayage firm TCW Inc., told JOC.com in late June. “Our import customers are not desperate for the inventory, and our export customers have not grumbled a lot because they get it and are now used to [the delays].”

GPA and the South Carolina Ports Authority (SC Ports) also blamed congestion in Savannah and Charleston in part on ocean carriers diverting vessels from one port to the other to avoid berth delays. When imports destined for Savannah land in Charleston — or vice versa — drayage drivers are forced to make much longer hauls to deliver those boxes, tying up capacity that would otherwise be available to remove additional imports from marine terminals.

“There is benefit in logical port rotation changes, but omissions hurt everybody,” SC Ports CEO Barbara Melvin told JOC.com on June 23. “The steamship lines hurt the ports, and they most assuredly hurt the cargo owners because they had no idea when they were going to get their cargo because it wasn’t being delivered on a normal transportation route to or from their distribution center.”

“When ocean carriers displace these shippers, they only further clog the supply chain,” Lynch added. “We want Charleston cargo to go to Charleston and Savannah cargo in Savannah.”

In search of solutions

In an effort to address the congestion — and, more specifically, the underlying longer dwell times — the ports are increasing on-terminal storage space, using “pop-up” yards to house long-dwelling imports and empty containers, encouraging ocean carriers to pick up more empties and truckers to perform more “double moves,” and extending gate hours.

GPA, for example, says it is better equipped to handle the oncoming deluge of volume than it was at this time last year thanks to a significant increase in on- and near-dock container storage capacity. As of June 30, there were roughly 77,000 containers sitting at the Garden City Terminal in Savannah, about the same level as late last summer.

The port authority’s “Peak Capacity Project,” however, has increased Garden City’s effective storage capacity from 80,000 containers to 95,000 containers, and that number will rise to 99,000 before the end of the summer. “Effective” storage capacity refers to about 80 to 85 percent utilization of the terminal space, as any higher would create operational challenges for truck drivers and yard hostlers to safely navigate, according to various port officials.

GPA will also lean on temporary pop-up storage yards in Alabama, Georgia, and North Carolina for additional storage during peak season. Among those pop-up sites, Lynch said there is room in the Hulsey Yard in Atlanta to handle more long-dwelling imports, and space in Appalachian Regional Port and Statesboro Airport in Georgia, CSX’s Rocky Mount terminal in North Carolina, and Norfolk Southern Railway’s Huntsville terminal in Alabama to store more imports, exports, and empties, if necessary.

GPA will be able to store more boxes than initially planned at Statesboro Airport after the US Federal Aviation Administration in June granted GPA permission to stack containers five high at the airport, instead of three high.

GPA in late 2021 also began opening its truck gates during nighttime hours — from 7:00 p.m. to 11:00 p.m. — to help lessen daytime truck traffic and move more boxes off its terminals.

“We are not metering vessels at this time,” said Lynch. “Last fall, we were metering vessels because we were running out of space. Even with volume on the water, we are working vessels with all our resources, all our cranes. Certainly, we don’t want [more than 30] vessels at anchor, but our terminal is fluid. Everything is working well right now.”

The Virginia Port Authority (VPA) will also lean on backup sites to store containers if terminal utilization at its two primary container facilities — Norfolk International Terminals and Virginia International Gateway — exceeds 80 percent, according to CEO Stephen Edwards. VPA in the spring stored excess long-dwelling containers at the Portsmouth Marine Terminal, which handles breakbulk and project cargo, and is ready to barge containers to the authority’s inland port in Richmond or send them by rail to the Virginia Inland Port in Front Royal, Virginia, if necessary.

“We have another 20-acre site in Portsmouth ready to go with top loaders if we need it,” Edwards told JOC.com June 24. “We’ll do our best to keep the gateway fluid by moving long-dwelling boxes if we need to. But most importers are now taking a closer look at their inventory levels as well because Wall Street is watching.”

SC Ports is embarking on what it calls “Project Terminal Recovery” to remain fluid after import volumes through the Port of Charleston jumped 22.8 percent in the first five months of 2022.

“Given the vessel queues off these East Coast in general, we feel the time will come where we'll see not just our ships, but additional ships, and ships out of rotation,” said Melvin. “It’s a good time for us from an operational standpoint to clear up the rail and marine terminals, and get ready for the next time, for the next game, so to speak.”

Much ado about empties

After handling more than 2 million TEU in imports so far in 2022, a 9.7 percent increase from January through May 2021, port officials in New York and New Jersey are focused on finding additional space for and helping carriers to vacate the resulting flood of empty containers returning to its terminals.

According to an ocean carrier executive who asked not to be identified, imports were flowing more quickly off the docks in New York and New Jersey at the end of June, thanks in part to “constant pressure by the terminals and carriers to pick up units in order to return empties.” Still, roughly 25 percent of the imports that carrier brought into the port throughout the month sat for eight days or longer before being picked up, the source said.

“Empty containers are piling up within the terminals and within the depots,” Rooney said during the briefing. Multiple carriers have made a “concerted effort” to pick up more empties, deploying 13 extra-loader vessels to sweep up empties from the port through May, including five in May alone, she said.

The ocean carrier executive said two more ships are expected to call Maher Terminals in New Jersey in the next month to take out a total of 3,000 empty containers.

Many lines have also committed to “load balancing,” or more closely matching the number of containers vessels pick up — whether loaded or empty — with the number of boxes they drop off during each call, “but it’s not enough and it’s not fast enough,” Rooney said.

The resulting lack of storage space has created a situation in which terminals are unable to accept empty returns from truckers. “And by not having a place to return the empty containers, the chassis is not available to pick up the next import container,” she noted.

In response, C&C Maintenance, a unit of diversified container equipment firm Integrated Industries, opened a third container storage yard next to the Port Newark Container Terminal (PNCT) in June that will be able to store up to 5,000 grounded containers.

Columbia Container Services opened space at its Elizabeth Chassis Depot for grounding empties, and third-party logistics provider firm Salson Logistics is hiring longshore labor to handle more containers at its reopened Ironbound Intermodal yard in Newark. H&M Intermodal Service, a unit of drayage and third-party intermodal logistics provider IMC Companies, has also opened a 10-acre site in Newark for empty and loaded containers.

Maher Terminals also plans to take delivery of more yard equipment in July to handle empties. In another move to alleviate the space constraints, Maher Terminals on June 15 also began requiring double moves — in which a truck picks up an import load after dropping off an empty or export container — for some ocean containers.

Contact Ari Ashe at ari.ashe@ihsmarkit.com and follow him on Twitter: @arijashe.

Contact Michael Angell at michael.angell@ihsmarkit.com and follow him on Twitter: @michael_angell.