Ports across the US East Coast are now in the eye of the storm, with import containerized volumes processed in the region mounting higher as the country heads into its peak shipping season.
Shippers continue redirecting their shipments away from the US West Coast to the East and Gulf Coast ports. This transition, albeit slow, has built momentum over the first half of ‘22, shifting congestion out of the West Coast ports to the East and Gulf Coast ports.
This transition made sense to shippers at the start of this year, as West Coast ports — especially the ports of Los Angeles and Long Beach — witnessed over 100 container vessels queuing up in the San Pedro Bay, awaiting berths.
Congestion increases in the East Coast
Such extraordinary delays led shippers to move their freight via ports on the Atlantic and the Gulf of Mexico, spiking congestion in the region.
This is reflected in the number of vessels awaiting berth across the East Coast. For instance, the port of Savannah, one of the more efficient ports in the US, saw a staggering 750% rise in monthly average of vessels in July from the start of the year — with 34 ships queued this week versus four vessels in January.
While Savannah continues to process record import volumes month-over-month, it does nothing to stem the spike in vessel count anchored off its coast. The ports of New York and Houston face similar challenges, with 15 and 23 vessels in queue.
Shipment delays on the rise
The increase in port congestion across the East Coast inevitably affects vessel transit time. Shipment delay data from project44 shows that weekly average transit times have shot up over July at the ports of New York and Houston, roughly increasing by 50% and 16% respectively, in the month.
At 46.2 days as average transit time in the first week of August, the port of Savannah continues to record elevated numbers, which were as low as 34.9 days in the first week of April.
Longer transit times result in shipment delays that have been on the rise. These shipment delays are a direct result of queuing — as longer the queue, the longer the delay in vessel berthing, and the eventual offloading of shipment.
With 34 vessels on anchor, it is no surprise that shipment delays have spectacularly climbed at the port of Savannah to 15.3 days in the first week of August.
The port of New York is recently witnessing a sharp rise in shipment delays, nearly doubling to 8.6 days week-over-week. While the number of vessels queued outside the port has not increased over July, the issue lies in the port’s land-side activity, where long dwelling containers create issues with port terminal capacity.
The lack of enough space to offload containers has meant slower port operations, extending shipment delays.
To solve this issue, the port of New York recently announced a new quarterly container imbalance fee (coming into effect from September 1), aimed at penalizing container lines with excess empty containers dwelling at the port for a long duration.
The congestion on the East Coast is directly related to activities on the West Coast, with shippers continuing to stay skeptical of moving freight via the latter for fear of a sudden holdup.
This concern comes from the labor contract negotiation between the International Longshoremen and Warehouse Union (ILWU), which represents over 22,000 workers across the West Coast ports, and the Pacific Maritime Association (PMA), which speaks for the marine operators and terminals. With the contract having expired at the end of July, there is an industry-wide fear of labor strikes, which would strike at the heart of the West Coast port complexes.
This fear has helped the West Coast ports to clear up their congestion from early ‘22, running more efficient operations, with a considerable improvement in vessel schedule reliability today. However, this has ensured heavy import inflow to the East Coast, with no signs of a cooldown for the next few months. Chinese imports to the US increased by 20,000 containers in July month-over-month, reflecting the strengthening of Chinese manufacturing and port activity post lockdowns due to its strict COVID-zero policy.
Over 150 vessels are queued across the US ports, with 62% of the total ships off the East and Gulf Coast ports — a flip in fortunes from last year, where the West Coast had the larger share of anchored vessels. The East Coast ports are also struggling with a rise in long-dwelling empties, which are constricting export movement and dilating shipment delays. Such delays also subsequently remove container and vessel capacity, leading to increased freight prices.
A lack of warehousing capacity further inland is also threatening port land-side activities. Importers are not picking up their containers on time and leaving them stranded at port terminals and intermodal yards as temporary storage, even as they struggle to source warehousing capacity for their fresh inventories. In essence, there are several headwinds to port operations across the East Coast, and the situation can be expected to remain dire till the end of the peak shipping season.