US marine terminal acreage abuse cements port congestion

US marine terminal acreage abuse cements port congestion

Container ships at Los Angeles–Long Beach remained at berth for an average of nearly six days in the fourth quarter of 2021, more than double the 2.5-day average recorded in the fourth quarter of 2019. Photo credit: Shutterstock.com.

If there is one inescapable conclusion from the months of US port bottlenecks that have barely begun to recede in early 2022, it is that marine terminal acreage is, in an international trade sense, hallowed ground. And yet, that ground is continually underappreciated, abused, and disrespected to the extent that import, export, and empty containers are allowed to linger, turning terminals into storage yards rather than conduits between transport modes.

If the experience of the past two years has taught us anything, it’s the disastrous consequences of excessive container dwell time up and down the global supply chain.

The excessively long residency of containers on terminals — caused by a great variety of factors — is directly responsible for the 16-month vessel backup off the ports of Los Angeles and Long Beach that remained at 101 ships as of Feb. 1. It’s not complicated; when boxes pile up on the terminal, there is no space to offload more containers and, as a result, ships sit at berth for longer and arriving ships have to wait offshore.

Container ships at Los Angeles-Long Beach, the busiest US port complex, remained at berth for an average of nearly six days in the fourth quarter of 2021, more than double the 2.5-day average recorded in the fourth quarter of 2019, according to IHS Markit Port Performance data. The resulting impact on supply chains is huge. It takes more than double the amount of time — 110 days on average versus 50 days prior to the COVID-19 pandemic — for goods loaded into an import container to move from the factory in Asia to exiting the destination marine terminal, according to forwarder Flexport.

The disruptive impact of containers lingering on the docks has long been known within the industry and among regulators. For years, the Port of New York and New Jersey has tried, with little success, to convince importers to take delivery of containers during nighttime hours. At Los Angeles-Long Beach, terminal operators in 2005 began the PierPass program in an effort to spread out truck movements in and out of terminals during day and evening hours, with the long-term goal of transitioning to 24/7 operations.

“Even before the [congestion] crisis, we’ve been talking about the need for a 24/7 mindset,” Port of Long Beach Executive Director Mario Cordero told Yahoo News in October.

Despite ocean carriers being criticized by shippers for imposing unfair detention and demurrage charges, the US Federal Maritime Commission said such charges “are valuable when applied in ways that incentivize cargo interests to move cargo promptly from the ports and marine terminals.” The ports of Los Angeles and Long Beach echoed that view in threatening late last year to impose hefty fees on long-dwelling containers, a policy that hasn’t been carried out.

Excessive free time at root of problem

Terms in ocean carrier service contracts that favor the shipper are one reason containers pile up on terminals. During the decade leading up to the pandemic, overcapacity left carriers in a weak negotiating position, and shippers took advantage by negotiating free time on terminals that in some instances exceeded 20 days. With the pendulum having swung in carriers’ favor, lines are slashing free time allowances in new contracts, often to just three to five days.

But shippers’ need for free time reflects the highly imperfect nature of supply chains that will always sap fluidity from terminals. Goods don’t flow uninterrupted from factories in China to a consumer’s doorstep. Retailers may choose to import products months before they are sold and may not have the warehouse space to store them, and thus, the port becomes a convenient backup. A classic recent example was a deluge of imports in December 2018 as importers tried to get goods into the country, not to serve immediate demand but to avoid the Trump administration’s threatened tariffs on imports from China. That caused rare late-year delays at Los Angeles-Long Beach.

In theory, ports could further incentivize rapid movement of containers through their facilities via additional charges for long-dwelling containers, but competition stands in the way because shippers will gravitate to ports that don’t impose such fees.

“If you put a substantial cost on top of containers sitting in the port, that will drive change very quickly," said John Painter, CEO of Guangzhou Port America, Inc. "There has to be a wake up call, a penalty on any container siting over 5 days or 10 days...and that will drive change very quickly."

The inability of the US to restore normal flow is having global consequences. According to the newly released Kuehne + Nagel disruption indicator, which measures delays on a TEU basis, the US currently accounts for 80 percent of global port congestion.

And the problem goes well beyond import containers overstaying their welcome. Busy US ports get clogged up for many reasons, including a severe lack of new terminal capacity. The Hugh K. Leatherman terminal at the Port of Charleston, which opened for business in March of last year, was the first entirely new US marine terminal to commence operations in 11 years, but it has been largely idle due to a dispute between the port and the International Longshoremen’s Association. In addition, the ability of ports to expand throughput by densifying operations is held back by limits on terminal automation agreed to in longshore labor agreements on the East and Gulf coasts.

Ultimately, eliminating congestion necessitates ensuring adequate container flow through terminals. When that core issue is prioritized, the performance of the US port system — and the global supply chain — will improve.

Contact Peter Tirschwell at peter.tirschwell@ihsmarkit.com and follow him on Twitter: @petertirschwell.