The Real Cost Of The West Coast Port Strike Pt. 2

Two months after the end of the catastrophic West Coast port dispute, carriers on the West Coast are still struggling with the lingering effects of the shutdown, and economists are tallying up its final price tag. Meanwhile ports on the East Coast are adjusting to the massive influx of cargo that has been redirected from the West Coast—some finding it easier to handle than others. This article is part two in a series covering the ways the West Coast port strike has disrupted the state of freight shipping in the United States.

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Ships Rerouted From West Coast Cause More Headaches Than They Avoid

Starting in late 2014, as the threat of a total shutdown loomed at ports on the West Coast, carriers  began rerouting freight ships to other ports in the US, Mexico, and Canada. Those container ships rerouted inside the United States began exposing deficiencies in the country’s port infrastructure, especially at ports on the East Coast.  In a typical January the West Coast handles 64% of all US container traffic. This year, that share dropped to 55%, with the 11% difference split between ports on the East Coast.  While the increase in freight volume going through East Coast ports has been welcome for some, many are finding themselves ill-equipped and unprepared to handle such a rapid increase in freight. 

Port of Virginia Drives Truckers to Social Media

Truckers at the Port of Virginia have gotten so exasperated with the level of congestion at the docks over the past several months that they’ve set up a facebook page to keep each other updated on how bad the backup is on any given day. Severe weather conditions shut the port down over the President’s Day weekend and since then port productivity has dropped 50%.  The unprecedented congestion has spread to three of the port’s four terminals. Dock workers now face a six week long backlog of containers waiting to be moved at the waterfront and customers have resorted to reserving truck capacity two weeks in advance of expected pickup time. 

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Despite being inundated with a cargo backlog the port is taking some steps to alleviate the congestion. On March 31st, port authorities announced they had broken ground on a new cargo holding yard specifically for rail containers—right now truck and rail freight are stored in the same yard.  The port has also lengthened its hours of service and requested permission for customs officials to work overtime. Port officials are also counting on congestion to die down in the coming months as the surge in cargo from the west coast diminishes. Whether or not that relief is realized, the level of difficulty this surge in freight has presented does not paint an auspicious picture for supply chains looking to utilize the port in the future. 

Wait Times Cripple Port of New York-New Jersey

Virginia is not alone in its struggle to handle its share of the diverted freight from the West Coast—the Port of New York and New Jersey (PANYNJ) has been experiencing similar levels of congestion as the volume of containers it’s handled so far in 2015 approaches record- breaking levels. 

To see how well the port is handling the excess freight, look no farther than the entrance to the port’s global container terminal, where a line of waiting truckers waiting for cargo stretched six miles onto the nearby NJ turnpike.  Long wait times for truckers means that containers are often unable to be cleared for days after being unloaded. The longer it takes to clear these containers from PANYNJ’s temporary storage area, the more customers incur in demurrage penalties as they sit unable to be reached by pining truckers and the greater the overall burden on supply chains. 

If you ask carriers, the delays are more a product of hubris than anything else. “They’ve taken on more business than they can handle. The emperor has no clothes,” Tom Heimgartner, president of drayage operator Best Transportation, told the JOC. Right now supply chains going through PANYNJ are accruing extra costs as drivers get paid for unproductive waiting time, unattended containers are penalized, and unloading delays are exacerbated. In February, PANYNJ reported handling a 15% year-over-year rise in the total number of standard containers handled, a surge that has seen PANYNJ pass the port of Long Beach to claim the title of 2nd busiest port in the USA. Whether or not NY-NJ is able to retain that title as carriers and supply chains are frustrated by delay times, remains to be seen.

Port of Savannah Rises To Volume Challenge

Where the Ports of Virginia and New York-New Jersey are struggling to manage the influx of West Coast port cargo, the Port of Savannah is prospering. In the middle of March the Port of Savannah welcomed the 1,145 foot long ZIM Container Tianjin, the largest ship ever to dock at the port. Robert Morris, a spokesman for the Georgia Port Authority betrayed that he was “pleasantly surprised” by the port’s ability to handle such a rapid increase in volume. The US’s fastest growing port has been free of delays despite experiencing a 33% year-over-year increase in containers handled in February and March,approaching but never exceeding the port’s capacity.

Construction has also begun on the long planned Savannah Harbor Expansion Project (SHEP). The $706 million project will deepen the shipping channel and allow ships even larger than the record-breaking Tianjin to dock in Savannah and increase the port’s total annual capacity by 44% to 6.5 million TEUs. These expansions and continued efforts by the Port Authority to keep operations running smoothly will likely keep spot-rates at the Port of Savannah low and position it better than most ports on the East Coast to handle the continued increase in volume expected into 2016.

The Bottom Line

Before the port strike, East and West Coast ports were planning for very different narratives in 2015. East Coast ports planned to spend the year gearing up for the completion of expansions and improvements to the Panama Canal in early 2016. For the West Coast, 2015 was meant to be a pageant year to show off its superior ports and excellent intermodal rail system and convince carriers that it was up for the challenge of competing with the East Coast and an expanded Panama Canal. Instead, East Coast ports have had to handle 31% more containers than average this year, forcing port authorities to employ stop gap measures to deal with the added volume and leaving few with time to make good on their improvement plans.

Whatever the outcome of the congestion, ports on the East Coast are going to have to acclimate to handling larger annual freight volumes. As the American economy continues to pick up steam, international import and export volumes are expected to continue increasing. The East Coast ports that deal with the current massive influx of freight most effectively should be earmarked as higher priority options for supply chains going into the end of the decade.  

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