If one issue has impeded the fashion industry’s hopes of a recovery in 2021, it has been shipping headaches. It’s hard to imagine any piece of the supply chain that has not faced difficulties from massive delays and skyrocketing freight costs. The looming question is not when, but if things will ever return to some kind of normalcy.
The import rush reached a crescendo in February, with hubs like the Port of Los Angeles and Port of Long Beach “pushed to the brink” by the record-breaking arrivals, container shortages and the sidelining of workers due to Covid, according to the International Longshore and Warehouse Union. The Port of Long Beach’s executive director, Mario Cordero, noted that the sheer volume of imports that the complex experienced was “unprecedented,” surpassing any other fluctuation in recent decades. “Nothing compares to what we’re experiencing this year,” he said at the time.
The SoCal port complex is responsible for moving an estimated $400 billion during an average year. Momentous disruptions in 2020 constrained that flow to a relative trickle, especially at the start of the pandemic. Still, the Port of Long Beach processed $17 billion in goods, and the gateway’s February metrics showed a 32.7-percent year-over-year increase in cargo imports from the same period last year.
Cordero said that Long Beach saw queues 37-vessels strong waiting to berth in late February, while Phillip Sanfield, a spokesperson for the Port of L.A., quoted up to 40 during the same time period. As workers struggled to keep up with the deluge of cargo, shipping containers piled up, and ground logistics providers struggled to gain access to the goods they were commissioned to transport to warehouses.
Across the globe, the shortage of containers combined with the high demand for space on cargo ships led to dizzying increases in shipping prices that reached up to four times agreed-upon rates in some cases.
The issue was exacerbated in late March, when a massive container ship ran aground in the Suez Canal. The 1,312-foot vessel blocked traffic in the Egyptian waterway for six days, halting the movement of critical goods like oil, chemicals, grains and other commodities, and costing the global economy about $400 million an hour in the process, Everstream Analytics estimated.
Authorities gauged the canal’s week-long shutdown to have tied up as much as 15 percent of global container shipping capacity, causing rates to shoot skyward. By late April, Drewry’s composite World Container Index (WCI) revealed an average cost of $5,096 per 40-foot container or equivalent unit (FEU)—$3,292 higher than the five-year average of $1,804.
Despite the price hikes, companies clamored to outbid competitors for space on ships, desperate to bring already-late orders to their destinations. According to Everstream, shipping hubs in Europe and Southeast Asia, like Rotterdam, Holland and Singapore, faced especially high congestion levels due to the concurrent arrival of vessels. Ocean carriers also began skipping calls at smaller ports in order to streamline their routes and return to Asia more quickly for their next round of shipments.
As costs and delays continued to mount, China’s third-largest port faced a Covid outbreak in late May that crippled operations, leading to a sizable backlog of goods. The Yantian port, situated north of Hong Kong, moves about 25 percent of the country’s total export volume to the U.S., according to Gartner analyst Brian Whitlock. Amid the outbreak and subsequent closures to parts of the facility for sterilization, production dwindled, hovering around 20 percent throughout June and doubling by mid-month.
Meanwhile, about 25,000 containers stuck at Yantian remained out of commission for weeks, and many ships canceled their sailings to the port through the end of June and early July, rather than risk becoming stuck at anchor, Whitlock said. Shippers whose goods originated at other ports in China also saw their goods held up by the delays, since Yantian is a part of the service string for many ocean freighters.
Following the developments at Yantian, UBS data indicates that container prices are expected to climb during the peak shipping season of August through October, when capacity dries up due to back-to-school and holiday shipments.
Compared with August of 2020, current container rates going to the West Coast have already climbed to between $8,000-$9,000 per unit, UBS said in late June, while East Coast-bound containers are experiencing rates of about $12,000—and up to $25,000 in some instances, for spot pricing. Comparatively, in 2019, containers shipping to the West Coast cost brands around $1,000, while East Coast units averaged $2,200.
These astronomical rate increases, combined with the ongoing port congestion, have led to inventory shortages and lost sales for brands after a year full of headwinds, the National Retail Federation (NRF) said in June. The retail trade group requested a meeting with President Biden to discuss the roadblocks preventing brands and retailers from meeting burgeoning consumer demand and forecasted that retail sales will grow by up to 13.5 percent, to more than $4.44 trillion, this year.
The American Apparel & Footwear Association (AAFA) also fired off correspondence to Biden last month, noting that continued backlogs at ports, container shortages and ground transport disruptions have all hampered retail’s recovery—even as vaccinated shoppers head back to stores.
“There’s no shortage of demand from consumers, but there continue to be shortages of labor, equipment and shipping capacity to meet that demand,” Jonathan Gold, NRF vice president for supply chain and customs policy, said. “Supply chain disruptions, port congestion and rising shipping costs could continue to be challenges through the end of the year.”
When will the ports recover?
Despite experts’ grim outlook for a total recovery in the near future—Gartner’s Whitlock projected that shipment delays and container shortages will continue to impede global trade through Chinese New Year—U.S. ports have ramped up production to record levels in recent months.
NRF’s Global Port Tracker noted that American ports handled 2.15 million 20-foot containers or equivalent units (TEUs) in April, making for the busiest April on record. Volume increased by more than one-third from 2020, the data showed. The group forecasted that May would see a year-over-year increase of 51.1 percent, amounting to 2.31 million TEUs hitting U.S. shores.
“This has really been a historic run over the past year,” The Port of L.A.’s Sanfield told Sourcing Journal. After seeing import volumes fall by 25 to 30 percent during the pandemic’s peak, “an unprecedented buying surge kicked into gear.”
“It picked up late last summer, and it’s just been at an incredible clip since then,” he said. “What we’ve seen at the ports is that each month has basically been a record-breaking month, one bigger than the next.”
Pre-pandemic, it was rare to see vessels waiting to berth at the port, he added. “It’s kind of like LAX—if your plane was due in at 8:15, a gate was assigned to you, and it would be open for you to come in and land.”
Now, all that has changed. The port is currently handling an average of 900,000 containers each month—42 percent higher than 2020 volumes, Sanfield said. That number would have once represented a “great month during the peak season,” but now has become a norm. Prior to the Covid crisis, the port was seeing about 10 ships berth each day, and now, an average of 16 vessels are docking daily.
In May, the Port of L.A. set an all-time Western hemisphere record when it surpassed 1 million TEUs—a productivity leap of 74 percent from the same period last year. Just one month later, the port bested itself again, becoming the first in the Western hemisphere to process 10 million container units in a 12-month period.
“The port is the beating heart of our economy, the backbone of our region’s prosperity, and the crossroads that makes Los Angeles a true gateway to the rest of the world,” Los Angeles Mayor Eric Garcetti said at a ceremony commemorating the event. “Reaching this remarkable milestone is a reflection of its role as a critical engine of the global supply chain—and a testament to our unmatched port infrastructure and highly skilled workforce.”
L.A.’s record-breaking numbers are especially notable given the past year’s challenges, which saw about 900 port workers sidelined by Covid infections, Sanfield said. And even as productivity churns at a historic rate, the port is still imploring the 200,000 different cargo owners that utilize the gateway to quickly collect their goods to make room for the unending stream of containers floating in from overseas. The challenge is compounded by the continued shortage of warehousing and distribution space felt across the state, he added.
The trade imbalance with Asia will also continue to add to the pileups at American ports, Sanfield said. “What we’re experiencing is one-way trade—it’s all on the import side,” he said, noting that L.A. is currently processing five containers loaded with imports for every single container that ships out filled with American-made goods. “It’s not a sustainable situation,” he said, noting that freight forwarders are so eager to get containers back to Asia to fill them with more goods that they’re making the return trip empty.
“We at the Port of L.A. have called for a national export initiative so that we can help American manufacturers and agricultural exporters somehow get ahold of these containers, and make it work,” he added.
As pressures continue to mount, the port is pushing to drive efficiency through digital investments aimed at providing more visibility into operations, Sanfield said. This spring, it launched a tool called Control Tower, which provides snapshots of turn times at all of the cargo terminals. These insights are updated continuously with GeoStamp data that is broken down by daily and monthly historical averages going back to 2017, helping the port to quickly identify trends in shipping and fluctuations in volume.
The tool builds on the Port Optimizer cloud-based digital portal for maritime shipping data, which launched in 2017, as well as the Signal, which provides a three-week snapshot of cargo coming into the port on a daily basis. In November, the Port of L.A. launched the Return Signal, which provides data for trucking companies that lets them know when and where to return empty containers within the complex.
While these tools are helping to streamline operations and increase cargo traceability, Gene Seroka, the Port of L.A.’s executive director, believes that government intervention is needed in order to help lessen the load felt by America’s port systems. On June 15, Seroka submitted written testimony on the impacts of shipping container shortages, delays and increased demands on the supply chain to the U.S. House of Representatives committee on transportation and infrastructure.
“When our supply chains work well, they operate largely unnoticed, delivering essential goods, creating jobs, and driving economic growth and prosperity across the nation,” he wrote.
“Clearly, a well-functioning supply chain is in the national interest, but effective federal support to improve the performance of our supply chains must be developed with a solutions oriented approach and with representation from relevant federal agencies and supply chain stakeholders,” he added, including cargo owners, port authorities, ocean freighters, marine terminals, the trucking industry, railroads, warehouses, and customs brokers and freight forwarders.
“Our freight system requires robust freight infrastructure investment, and importantly, this investment should include accelerated and integrated digitalization of the supply chain,” the executive director said. Moreover, those systems—which are already humming across Asian and European gateways—must be bolstered in the U.S. market and interconnected to provide a means for collaborative work. “Such integrated digital platforms can equip cargo owners and service providers with the information they need to optimize their supply chains and enhance resilience to future supply chain disruption,” he added.