Month: January 2015

State of US West Coast Shipping Heading into the Chinese New Year

As we close out the month of January, I think it is extremely important for those who ship into and out of the U.S. West Coast ports to have a clear outlook of what to expect in the following months. Chinese New Year is on the horizon (February 18th) and is already impacting the shipping industry.

West Coast Terminal Congestion
Los Angeles and Long Beach ports continue to be a bottle neck. Vessels anchor outside the port waiting to be worked on and when they are worked on, it is taking over a week for the work to complete. Vessels are overall averaging two weeks or longer in Los Angeles/Long Beach. Many steamship lines have taken to “drifting” their vessels as they sail towards Los Angeles/Long Beach, as there is no point in rushing the vessels to the port if the vessels are expected to anchor and wait to be worked on.

I have heard rumors of customers paying massive amounts of demurrage / storage charges in Los Angeles / Long Beach, with one customer telling me they had a bill from their freight company for over $40,000 in demurrage fees and another customer mentioning a bill of over $30,000. I’m not sure how accurate these stories are, but they are an example of what many importers are facing as they fight to get their containers at the port. Importers are not just fighting to get containers out, but also fighting the terminals/carriers over demurrage charges.

While Oakland continues to face similar congestion, the port at least was able to go one week without a terminal closure incident. Various truckers are still refusing to go into the problem terminals, in particular SSA Terminal. However we did notice that containers arriving at Evergreen’s BENT terminal this week were able to become available for pick up within a day or two after coming off the vessel. This was a great improvement over previous weeks when we would routinely see containers be placed in closed areas for roughly a week after coming off the vessel.

Are any vessels still planning to come to Oakland?
Due to the delays in LA/LB, carrier sailing schedules are no longer able to follow predictable weekly sailing patterns. In order to try to get vessels back on schedule, many carriers have eliminated calling second ports along the West Coast. For example, Oakland has seen a drastic reduction (at least five strings have been eliminated). I have heard other carriers also are discussing whether or not to remove Oakland as a port calling. One carrier representative explained to me that the cost of sending a container from Los Angeles/Long Beach to Oakland via rail was cheaper than sailing a vessel to Oakland and having it wait at the port to be worked on. It is no coincidence then that more carriers are also discussing dropping Oakland as a port calling.

Are there any vessels to pick up containers in Asia before the CNY?
One carrier representative advised me yesterday that space on vessels departing from Asia is completely booked up through the month of February. This is due to a combination of reasons:

  • The usual surge of product departing from China before the CNY.
  • The fact that most vessels are stuck on the West Coast waiting to go back to Asia.
  • Despite the lack of vessels and abundance of cargo, carriers are still planning on skipping a week and having a “blank” sailing after the CNY.

PMA-ILWU Contract Situation
I do view the fact that Oakland went a week without a labor stoppage as a sign that the contract negotiation is finally moving forward. Assuming the two sides don’t have any massive arguments in the coming week, there is room for optimism that a contract may finally be agreed upon.

Nevertheless, even when the PMA and ILWU agree on a contract, it is going to take months to unwind ourselves from this mess at the ports.

If you have space confirmed with a carrier, I highly recommend that you don’t mess around with it. I have had various importers and exporter come to me complaining about the listed transit times on containers that we have booked. In light of the vessel availability situation, the top priority for every importer should be just getting product out during the month of February.

Let me know if you have any questions.

-Jimmy Ting
Great World
jimmyting@gwlcorp.com
t: 650-873-9050 x1019

Are We On The Verge of a Complete West Coast Port Shutdown?

Update on Port Conditions

I don’t want to be the boy who cried wolf, and I certainly have been ringing the alarm often these last few months. However recent actions at the West Coast port terminals have undeniably put us right on the brink of a complete port shutdown. With all three major ports areas (Seattle/Tacoma, Oakland, Los Angeles/Long Beach) discontinuing longshoremen labor at night to unload containers off vessels, the port conditions will only continue to get worse.

In the past few weeks we have seen the following:

  • SSA and BENT terminal in Oakland shut down last Thursday due to disagreement between the ILWU and PMA..
  • Five strings calling the port of Oakland have been eliminated. This will significantly decrease the capacity coming to Oakland. Those with containers on vessels that eliminated the Oakland port calling will have containers railed to the port of Oakland from the port of discharge.
  • Vessels continue to sit at the port of Los Angeles/Long Beach for multiple weeks before departing.
  • Containers that are unloaded from vessels have an increased likelihood of being put into a closed area.
  • Steamship lines and terminals are in some cases barely extending any free time when containers are put into closed areas.
  • Some terminals are refusing to accept empty container returns for extended periods of time.
  • For export shipments, some terminals are refusing to accept loaded containers that are ready to be delivered to the terminal. This only acerbates the chassis shortage problem as many of these loaded containers are sitting on chassis that are much needed on the import side. One of our trucking partners indicated to us that they have over 300 loaded export containers sitting in their yard or at their customer’s dock waiting for the terminals to accept them.

I mentioned that the PMA and ILWU agreed to Federal Mediation at the beginning of the year. Mediation was supposed to be accompanied with a news blackout. However both the PMA and ILWU have been trading public attacks leading us to believe that mediation is not working.

My feeling is that the next step will be a complete port shutdown. There’s no where left for the situation to progress to. One local carrier representative mentioned to me that we should pull out from the ports as many containers as we can right now as a shutdown could happen any moment. I found this comment amusing as no one is holding back on pulling out containers. We’ve been desperately trying to get containers out as quickly as possible these last few months. The trucker who has 300 export containers waiting to be returned to the terminal also believes that this situation cannot go on for long.

Monday, January 19th, is MLK holiday. Some terminals are open. Others will be closed. A few will be open in limited capacity only. One less day to pull out containers will not help.

I hope I am wrong about a shutdown, but all signs indicate that we are sitting on the precipice and staring straight at a shutdown.

What alternatives do shippers have?

Many shippers have come to me asking me what alternatives they have.

  • If they have the ability to ship to the East Coast or perhaps to Houston, this is an alternative. Note that transit time is long (but perhaps not as long as having to wait it out at the West Coast ports). Furthermore, capacity on vessels to the East Coast is also very tight.
  • What about Canada? If you ship to the Midwest, you should undoubtedly be looking at rail through Vancouver or Prince Rupert as an alternative. However for those on the West Coast, is Vancouver really a viable option? The product would have to be removed from the container and transloaded onto a trailer before being trucked to the most locations in the United States. I recently priced this service out with a few various truckers. The current rough estimated cost to get a container of product from Vancouver to the San Francisco Bay Area would be somewhere between $4500 and $5000. There would be some variation depending on the size of the shipment and whether or not the product floor-loaded or palletized. This is a very rough estimate that could certainly change in the coming months/
  • What about air freight? This would have to be a last resort as air freight rates will assuredly surge during this time.

We will be watching this situation closely and providing updates as we receive them.

– Jimmy Ting
Great World
jimmyting@gwlcorp.com
t: 650-873-9050 x1019