- There were delays in handling ships at terminals in the Port of Los Angeles and Long Beach.
- A shipping expert told CNBC that current ship wait times are no longer “normal” and the maritime supply chain is “strained” at a level not seen since the return of the Covid peak.
- The Department of Transportation and the Biden administration are set to closely monitor developments at West Coast ports as trade groups from retail to manufacturing warn of economic damage and urge the Biden administration to intervene.
Tugboats steer the Mediterranean Shipping Co. (MSC) container ship Mia arriving at the Port of Los Angeles on Wednesday, April 1, 2020 in Los Angeles, California, United States.
Bloomberg | Bloomberg | Getty Images
The number of ships scheduled to dock at the Port of Los Angeles and Long Beach is rising as the downturn in work at West Coast port terminals impacts supply chain operations, from trucks to rail to ocean carriers.
On Wednesday, six ships were delayed in the Port of Los Angeles, while two ships in the Port of Long Beach were anchored upon arrival and unable to contact port operations, according to a ship update from the Marine Exchange of Southern California Produces & Vessel Traffic Service, Los Angeles and Long Beach.
Data from MarineTraffic shows that ship problems are moving from isolated to more widespread problems. Over the past two and a half months, average wait times at anchorage in LA have ranged from half a day to a day and a half, with service time averaging two to five days.
At the APL terminals in LA, docked vessels now occupy space for up to nine days.
“This suggests that we are out of ‘normal’ and are back in a strained maritime supply chain,” said Captain Adil Ashiq, Head of North America at MarineTraffic. He said those ships still need to be loaded/unloaded and sent away, which is important to make room for the next wave of ships en route to Los Angeles. “The domino effect can be difficult to digest considering that imports and exports are idle,” he said.
One of the ships waiting to call into the port of Los Angeles on Wednesday was the MSC JEONGMIN, whose voyage was documented with CNBC supply chain heat map data provider MarineTraffic and was an early example of how labor troubles at West were mounting Coastal ports began to affect sea operations. The ship, which was carrying products such as tires for Tesla, IKEA furniture, Trader Joe’s groceries, European wine, porcelain tile and granite slabs, departed the Port of Oakland on May 31. It was later seen circling for a day before the ship was due to arrive in Los Angeles, but when the ship arrived on Wednesday it was turned around and postponed to an arrival later in the day.
The CMA CGN Lyra has been docked in the Port of Los Angeles since May 31; CMA CGM Amerigo Vespucci has been there since June 1st. The YM Unicorn has been at the Ports America Terminal since May 31 and the One Hangshou Bay since June 2.
When ships go off-schedule, the delays shift ships’ arrivals to other ports, affecting their container shipments and ultimately contributing to the container congestion seen at its extreme during the Covid pandemic.
The Vespucci’s next stop is Oakland, where the ships have also pulled back due to labor problems that led to shutdowns late last week. The contents of the containers for Oakland are already delayed. These developments come as shipping enters the peak stock-building season, which runs from July to October, ahead of the back-to-school and bank holidays. While overall demand is expected to be relatively subdued given the economic backdrop and softening consumer demand, West Coast ports have regained volume lost to East Coast ports over the past year as uncertainty in ongoing collective bargaining has weighed on shippers prompted them to redirect their activities.
Port operations are critical for both trucking and rail transport, as these are the land industries that are impacted when containers cannot be moved efficiently. Import container activity has improved but export processing was still very high on Wednesday. Earlier this week, Union Pacific was forced to temporarily halt its ramping operations at California ports. While Union Pacific lifted that pause on Wednesday, this week ITS Logistics raised the alert level to “red” for freight traffic, posing a serious risk.
The National Retail Federation issued a statement earlier this week calling on the Biden administration to intervene in ongoing work talks between the International Longshore and Warehouse Union and the Pacific Maritime Association, which represents West Coast ports.
On Wednesday, the National Association of Manufacturers released a letter to President Biden and Secretary of Transportation Pete Buttigieg, describing current port conditions along the West Coast as “closed or significantly disrupted” and urging the government to intervene.
Trade groups have warned of inflation spikes from new supply chain problems, even though overall global supply chain costs have fallen well below Covid highs, according to the New York Fed-managed Global Supply Chain Index.
During the recent spike in labor tensions, some union workers have refused to show up for their shifts, while others have been withdrawn from work by port management. The unstable situation in the ports continued on Wednesday. CNBC said the SSA terminal in the Port of Seattle had eased union workers’ groups working on ships for the third straight day because of “low productivity.” In a maritime sense, a terminal can “fire” a work crew for a shift if it feels work is slow, and the workers can return the next day. The Port of Tacoma terminal remains operational despite reports of 50% labor productivity.
Secretary Buttigieg and Gen. Stephen Lyons (Supply Chain Officer of the Biden-Harris Administration’s Supply Chain Disruptions Task Force) have worked with the parties over the course of the negotiations for more than a year and encouraged all parties to work together with confidence to reach an agreement to achieve.
The Biden administration and Congress stepped in late last year to avert a railroad strike that could have crippled the national economy.