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Transportation Trends: What to Know About Cost, Congestion and Capacity

The highs and lows of supply and demand during the pandemic—of goods, labor and ships—created transportation bottlenecks and pricing surges, but shipping is beginning to get back to normal.

At the height of the shipping crisis in the first months of 2022, a record 109 container ships were waiting for a berth outside of the Port of Long Beach, said Peter Tirschwell, vice president, maritime, trade and supply chain at S&P Global Market Intelligence, during the United States Fashion Industry Association’s 2022 Apparel Importers Trade & Transportation Conference. Globally, 15 percent of ocean container capacity was idle due to backups, compared to about 2 percent in normal, pre-Covid times and 8 percent currently.

Freight rates have also stabilized after prices hit $30,000 and more per container traveling from Asia and the U.S.’s West Coast. Today, the cost of a container for this route is around $1,500.  

“Even though on the surface it looks like the system is normalizing—freight rates coming down, vessel backups diminishing, there’s still vessel backups on the East Coast—there is now, going into this sort of post-Covid era, what my colleagues and I believe to be a higher level of risk,” Tirschwell said.

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Whereas before, there was a degree of reliability that allowed for models like just-in-time manufacturing, slimmer inventories and shorter lead times, Tirschwell noted that, “the level of confidence that exists in the system is now greatly damaged and diminished as a result of the experience that we’ve seen over the past couple of years.” This “lost faith” therefore has companies considering their inventory levels.

“If you’ve lost confidence in the supply chain, and if the supply chain has elongated by double the amount of time required to get goods from the factory to your distribution center or the customers, well, then you’re going to make sure that whole pipeline is completely full, and that means ordering a lot more inventory,” said Tirschwell.

The number of containers moving into the U.S. has been growing, but Tirschwell noted there has not been berth capacity expansions at ports to handle this larger volume. One outlier is Charleston, S.C., which opened a new terminal in March 2021, which he said was the first newly built terminal in over a decade. The Port of Savannah in Georgia is also expanding its capacity with a new berth.

In response to historical issues like labor disruptions, companies diversified their shipment destinations, causing the West Coast to lose share of imports while the East and Gulf Coasts grew their shares in the last couple decades. Lately, with labor unrest out West as well as production shifting from China to Southeast Asia—which makes travel through the Suez and Panama Canals to the U.S. strategic—more imports are coming to the East Coast. For the last few months, New York has risen to the top position in monthly port volumes. “This is putting an enormous amount of pressure on U.S. East Coast ports where the capacity is really not there to handle it,” said Tirschwell.

East Coast

In another session, representatives from the Port Authority of New York and New Jersey and the Port of Long Beach shared what they are seeing on their respective coasts.

Although there has been some “softening,” Michael Bozza, assistant director, commercial division, port department at the Port Authority of New York and New Jersey, said that volumes are still up 34 percent over pre-pandemic levels. A key challenge for the New York area has been chassis availability, but this has also improved. Bozza noted that recently, there were 1,200 to 1,400 chassis available in a New Jersey facility that was at one point nearly empty. “Things are starting to come back,” Bozza said. “Whether or not they stay that way, I think that remains to be seen, but for now, we feel like we’re getting a little bit of a break.”

To tackle the issue of empty containers causing congestion, the Port Authority introduced a container imbalance fee in August, which went into effect in September. From the time the fee was announced, 15 percent of the 200,000 surplus empty containers were removed.

Another effort underway to improve the movement of goods is the $150 million roadway project. This initiative will soften turns, improving safety for truckers while also preventing backups due to accidents. Other investments include increased berth space, ship to shore cranes and the Southbound Connector project that will grow intermodal rail capacity.

The Port Authority is also looking beyond its ports with a warehouse working group. Everything is interconnected, and if a warehouse is closed or doesn’t have capacity, there is nowhere for goods to go. “We have to be mindful of the entire chain, we can’t just worry about what happens to the box when it leaves our terminals,” said Bozza. “We’re making connections with the warehouse and distribution committee and trying to connect with those nodes.”

West Coast

At a high point, the congestion in Long Beach led to 14,000 containers waiting for trains for more than nine days, and 10,000 containers were queued up for trucks. Now the figure has dropped to 1,200 containers waiting for trains past nine days, said Samantha Galltin, managing director, commercial operations bureau, at the Port of Long Beach.

During the pandemic, the port turned 200 acres of unused land into container storage. Half of these acres were for a “short term overflow resource” for containers waiting to leave the port, thereby also raising capacity in the terminal. “I would expect in the next couple of months, instead of being filled with imports and rail boxes, it will now be filled with empties,” said Galtin.

Like New York, Long Beach faced a buildup of empty containers, and it urged carriers to clear them out by suggesting it would charge them. At one point, just 35 percent of all containers in the terminal were empty, but it has since risen to 52 percent.

Another project is a $1.5 billion rail yard. “Rail is the way of the future,” said Galltin. “If we are going to get our volumes up, if we’re going to handle the volumes that we think we’re going to have in the next 10 years, we’re not going to do it all by putting that through our gate; we’re going to have to do it by rail.”

With all of the disruptions, visibility is crucial. The port has created a platform called SWIMS, named for the frequently heard question: Seriously Where is My Stuff? Stakeholders such as steamship lines and railroad companies can add information about container movement, centralizing it. After a successful six-month test, it is expanding the portal to all of its terminals, as well as with partner ports like Oakland, Miami and Charleston, with the hope that it is eventually a nationwide resource.

Another area of investment is sustainability. Long Beach is piloting stations that can charge electric vehicles, and it has developed green shipping corridors with global partners, including the recently announced partnership between Singapore, Long Beach and Los Angeles.

“We retagged and rebranded in 2020 as ‘The Port of Choice,’” said Galltin. “While we are still absolutely environmental stewards, and that is one of our first and foremost things, we also recognize that we have a commitment to operational excellence and making sure that the customer and our stakeholders, our tenants, are all getting exactly what they need, in an environmentally safe and effective way.”