Is this the calm before California ports’ next cargo storm?

Finally, some relief from supply chain bottlenecks for the besieged ports of Los Angeles and Long Beach. In the first two months of 2022, the queue of ships waiting for Southern California berths fell, velocity of cargo moving through terminals increased and more boxes were unloaded at the docks.

Relief may be brief, however.

Gene Seroka, executive director of the Port of Los Angeles, acknowledged during a press conference on Wednesday that another round of cargo surges lies ahead. This week’s COVID lockdowns in Shenzhen, China, could lead to a “hockey stick” of inbound cargo volumes after factories reopen, he said.

Meanwhile, inbound volumes “will likely pick up given the direction retailers are giving us on their need to replenish inventories.”

Then comes the risk from port labor negotiations this summer and the annual peak-season increase, which last year began in May.

Seroka didn’t sound worried. “You can’t jump at shadows. You can’t jump around with your hair on fire,” he said. Rather, the port must use data to “see around the corners and over the hills better than in the past,” and “be as resilient as possible” to “handle the surges.”

Improving numbers

The Port of Los Angeles reported its best February ever on Wednesday, with total throughput (including imports, exports and empties) of 857,764 twenty foot equivalent units, up 7.3% year on year, and imports of 424,072 TEUs, up 2.7%.

Last week, Long Beach likewise reported its best February ever: 796,560 TEUs in total (+3.2%) and imports of 390,335 TEUs (+4.4%).

In November and December, imports to both Los Angeles and Long Beach fell, not just compared to earlier in 2021, but compared to pre-COVID levels for that time of year. It wasn’t due to a lack of imports — there was an entire month’s worth of cargo volume stuck on ships waiting offshore. It was due to landside bottlenecks that prevented more cargo from being unloaded.

That negative trend has at least temporarily reversed. Combined Los Angeles/Long Beach imports during January-February sequentially rose 8% compared to November-December, implying an easing of landside bottlenecks allowing more boxes to come ashore.

Another positive sign: The queue of waiting container ships rose from 73 to 101 over the last two months of 2021. So far in 2022, it has fallen from 101 to 43.

“Fluidity and velocity on our docks continues to improve,” said Seroka. Average container dwell time in Los Angeles is at five days, down from a high of 11 last fall. On-dock rail dwell time is at four days, down from 13.5 days last summer.

Seroka also cited fewer cuts in port labor gangs, with 550 gang cuts in December, 600 in January and just 200 in February. The reduction, he said, shows that the omicron wave affecting port labor has abated and “terminals have more space to maneuver and are not being forced to turn away work shifts.”

Velocity of cargo leaving Los Angeles terminals has also increased, rising from 170,000 containers leaving in November to 200,000 in the past 30 days.  

What comes next

However, the sharp drop in the offshore ship queue does not appear to be primarily driven by greater cargo velocity on land.

According to consultancy Sea-Intelligence, which analyzed trans-Pacific liner schedules, it is largely due to fewer ships leaving from Asia around the Lunar New Year holiday, a deployment trend that is now reversing.

“We expect an increase in vessels headed our way,” Seroka confirmed.

Asked about the COVID outbreak in China, he said that about a third of Los Angeles’ imports come from areas affected by lockdowns. “This is a developing story. We are watching it very closely.”

What happens next “depends on how severe this particular wave is and what the central government is going to do. If factories shut down, the impact on cargo movements is not going to be felt for weeks to come. If the factories come back and they try to catch up on purchase orders, there will be another surge.”

When COVID closed the port of Yantian last June, it created a lull in trans-Pacific cargo flows to Southern California, allowing terminals to clear some of their backlog — after which the delayed cargo arrived, causing more congestion.

It could happen again. “If we have a lull due to shutdowns at ports, terminals, factories and other businesses that convey cargo, it is going to give us a chance to catch up even more,” said Seroka.

The number of ships heading towards Los Angeles/Long Beach across the Pacific is down to the mid-40s from an all-time high of 109 on Jan. 9, but it’s still well above the pre-COVID norm of 30 container ships en route.

“We’ve got some more work to do to get that down and be ready for the hockey stick,” Seroka said, referring to the potential wave of cargo that would arrive in Los Angeles after Chinese factories restart.

Source: Freightwaves - Is this the calm before California ports’ next cargo storm?
Editor: Greg Miller, Senior Editor