Introduction
Port operations are back to normal in the West and there are signs of relief in the East as well. Importers tolerated congestion and delays at West Coast ports throughout the pandemic. But by H1 2022, it became clear that they had soured on the LA gateway. They were keen to adapt for the holiday season and diversify their supply chains. Hence, in the months that followed, importers diverted cargo from ports in the West to those in the East.
This change in strategy seems to be working as port authorities stepped up their game. Despite the elevated traffic through East Coast ports, container turnaround times remain largely predictable. And while we're yet to see if this shift to the East will persist, port officials are trying hard to make it stick. “Our goal is to keep as much of that business as possible” says Rick Cotton, Executive Director of the Port Authority of NY/NJ. The final outcome, though, will come down to where importers expand their manufacturing. If China remains a manufacturing hub, the West Coast will continue to be a convenient gateway to the US. However, there are plenty of direct sailings to the East Coast from India, EMEA, and South America. So, if importers move their factories away from China, it might become favorable to import via the East.
Meanwhile, importers that move their cargo inland continue to struggle with IPI (Inland Point Intermodal) moves. This is true irrespective of which gateway port they use. Rail terminals on the West Coast remain congested with only 70% of trains arriving on time. The East Coast is bracing for winter related slowdowns. Railroads across the country are dealing with labor shortages relating to Covid-era furloughs. And, yes, the Senate did avert a national rail strike. But sources state that laborers are overworked and low on morale. Until railroads regain a sense of normalcy, Silq recommends that importers avoid inland rail. Instead, opt for transloading via trucks from either coast.
Port operations are back to normal in the West
Analytics and anecdotes alike point to decongestion at West Coast ports. As of 3 weeks ago, the ports of LA and Long Beach officially have zero ships waiting to berth. Terminal operations are smooth as ever and same-day drayage appointments are accessible again. This is in stark contrast to the chaos from even 8 months ago when terminals were running out of space. Back then, containers were stacked 4-high at ports. Or, better yet, placed on precious chassis and parked in the streets!
Lisa Wan of Roadex America, an LA-based trucking company, speaks of the improvements firsthand. “Terminals have loosened up their empty return restrictions. So, we can make many dual transactions to return empty and reuse the same chassis to pick up new loads. [Also] the average turn time [for trucks picking up containers] has improved from upto 6 hours to under 2 hours in the last 30 days.”
Import traffic moves East
According to a recent analysis by Silq, West Coast imports in Q3-22 returned back to 2019 levels (~3.4M TEUs per quarter). At the same time, imports into East Coast ports climbed to an all-time high (~4.1M TEUs per quarter). The question is, how permanent is this trend? Well, the Wall Street Journal suggests that its driven by a new retail strategy and that its here to stay.
As companies move their manufacturing out of China, shipping possibilities open up. East Coast and Gulf ports become practical gateways into the US. And retailers looking to reduce their dependence on the West Coast can now venture East. For them, it is worthwhile to add 10 days of sailing time in exchange for a predictable in-DC date.
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Inland rail moves remain tricky
While seaport congestion stabilizes across the US, rail shipping continues to be challenging. Take the Port of LA, for instance. As of December 9th, the port had ~9.5k rail containers waiting to get on trains. Of these, ~2.5k had been waiting for over 9 days. While these stats are getting better, they aren’t going away anytime soon
Brian Kempitsy of Port X Logistics says, “there is still severe congestion at many rail ramps and containers are getting grounded. If your container is grounded and put into a pile, you may have to wait a long time to recover the cargo. You may also have to negotiate with the steamship line to get waivers on storage charges.”
Part of the issue here is that the demand for rail has outpaced its supply. Over the past few years, railroads eliminated about a third of all jobs and enjoyed a steady increase in profit margins.
Today, however, as ocean carriers accept more bookings with IPI legs, U.S. railroads struggle to meet the surging demand. Rail capacity is rigid and it cannot adapt so quickly. And the workers that do remain on payroll are overworked and disgruntled. According to Zach Fajardo, Senior Manager of Ground Operations at Silq, “Workers face demanding schedules where, in some cases, folks are on call 24/7. Historically, railroad workers have lacked paid sick leave. That’s what they demanded of their employers - the railroad operators. However, what they got was a 24% raise and a $5k USD bonus without any sick leave.” 4 out of 12 labor Unions rejected these terms. But, with President Biden’s emergency intervention, this is the deal that was on the table.
Silq Recommendation
Our research shows that congestion in the US West Coast is a thing of the past. Meanwhile, rail service remains congested across the country. If your warehouse is within a few hundred miles of a US West Coast port, shipping and drayage will be fairly smooth. However, if you need to move time-sensitive cargo inland, avoid going on rail. Instead, opt for long-haul trucking via the US West Coast. Even as congestion eases at US EC ports, the winter months in the East and Mid-West can bring increased uncertainty to your supply chain. Hence, we strongly recommend retailers to exercise caution while placing bookings.
If you’d like some help optimizing your U.S. import strategy, reach out to Silq! Speak to an expert (or the author of this article) today.
