Date: Thursday, November 19, 2020
Source: Freight Waves
Container and chassis congestion at the Port of Los Angeles is so severe that it was about 10 minutes into a press conference Wednesday before Executive Director Gene Seroka got around to announcing an all-time monthly volume record at the port.
“I’ve been advocating for a comprehensive digitization strategy throughout the complex for many years. We need to use real-time data to make smart decisions. We owe that to our stakeholders and customers. We have seen signs of great traction with the Port Optimizer, The Signal and other data points here in LA. We need to be doing this more and deeper with digitized data. That’s why today the Port of Los Angeles, in cooperation with our partners at Wabtec, is launching the Return Signal,” Seroka said.
He announced the free Return Signal platform “is designed to help our trucking community know where and when it can return empty containers throughout the San Pedro Bay complex, thus enhancing the probability of dual transactions. Building on the data and the success of the Optimizer along with The Signal, the Return Signal is built on algorithms that will be updated every five minutes. We’ve made it simple to search, filter and customize data.”
Seroka said the current cargo crunch shows the “need to incentivize increased fluidity at the terminal level. In a few weeks, port staff will present to the Los Angeles Harbor Commission two unique programs for cargo terminals. One is a turn-time incentive that will pay for every minute turn times are reduced. The faster a truck gets in and out of our terminal, the more the terminal will be monetarily rewarded.
“Additionally, our board will consider a dual-transaction incentive. That means for every trucker that comes to the port, terminals will be monetarily rewarded to make sure the trucks enter the gate with a container and also leave with one,” he said.
“We also have a blueprint to get the chassis off marine terminals to a neutral site,” Seroka continued. “This could open up an additional 50 to 80 acres of space on our waterfront in Los Angeles. We are also making additional parcels of property available on a short-term basis to stakeholders in and around the port so they have the maneuverability in and around the terminals during this time period.”
Earlier this week, a coalition led by the Harbor Trucking Association (HTA) called for the Federal Maritime Commission (FMC) to consider an immediate suspension of detention and demurrage charges at the ports of LA, Long Beach and New York/New Jersey due to congestion.
“Demurrage and detention are not meant … to be weaponized,” Seroka said, pointing out the port is really a transit center, not a storage facility. “Exceptions have to be made and that’s up to the marine terminal operator, the liner shipping company. If the container is not accessible to the trucker for whatever reason, and especially in times of surge cargo like this, exceptions should be made. But we cannot just sit back and look and say it’s got to be one size fits all. That’s not the way the industry works.”
He reported that “container dwell time on terminals has doubled during this import surge to five days. Street dwell times while waiting for warehouse space to open up has also doubled, up to 7.1 days. And truck turn times are also going up because it takes more time to find containers inside the terminals. In the midst of this cargo crunch, the ILWU workforce is doing an outstanding job in handling as much volume as they can. Despite their great effort, it’s simply impossible for all of us to keep pace with this volume of cargo. The spike in imports is unprecedented in scale, breaking new records on a monthly basis.
“Compounding the problem is the fact that as containers mount, they need to be moved and rearranged often in the yards. Container cargo is sometimes stacked six units high. Multiple moves, which means time and money, are required to get the boxes at the bottom or the middle of those stacks. This puts additional demands on skilled labor working at our ports, particularly skilled train operators,” Seroka said.
He maintained that digitization could help prepare for incoming cargo, enabling equipment to be lined up and congestion to be prevented.
“With the Port Optimizer, we’ve got 10 to 14 days’ advance notice. Imagine if we could have 90 days’ advance notice,” Seroka said. “There is a lot of work to do here and it’s a bigger picture than just this one piece, but we have dedicated our time to the HTA, to the FMC. We want to be at the table with those discussions.”
The Return Signal is designed to provide relief, he said. “We can give the truck community a line of sight to what type and size of container and where they can bring it back to.”
The Port of LA processed 980,729 twenty-foot equivalent units (TEUs) in October.
“This is a year-on-year increase of more than 27% compared to October of 2019. It is the best single month in our port’s 114-year history, breaking the previous record set just a few months back in August,” he said. “For the last four months, the port has averaged more than 920,000 container units each month, a dramatic turnaround from the first six months of 2020, when we averaged just over 627,000 units.”
Imports hit “a staggering 506,613 TEUs, a 29% jump over last October and just shy of the record that was set in August as well. However, even with a four-month import surge, year-to-date our import volume is still down 2% compared to last year,” Seroka said.
Exports did buck the trend and were up 2.6% year-over-year at 143,936 TEUs, he said. “Yet year-to-date, exports are still down almost 14% year-on-year and we have dropped in this category 22 out of the last 24 months.”
Seroka said year-to-date through October, the port is tracking more than 5% behind 2019. “But that is truly remarkable because you may remember at the end of May, we were down nearly 19% compared to last year.”
Wanted: An export strategy
Empty containers reached a single-month record of 330,180 TEUs in October.
“That’s a nearly 40% increase compared to October of last year, and it is also sadly more than double the amount of loaded exports that departed our docks,” Seroka said.
As he has over the past several months, Seroka again called for a national export strategy.
“We’re at a point today where shipping line companies believe it makes more economic sense to send empty containers back to Asia rather than wait for loaded shipments with American exports. We need to fix these round-trip economics that are hurting the American exporter,” he said.
Agricultural consultant Jay O’Neil backed that up, telling FreightWaves that U.S. containerized grain exports “are no longer as attractive as they have been” because of unloading time in Asia. According to Specialty Soya and Grains Alliance, Hapag-Lloyd is refusing containerized grain shipments because of the turnaround time.
Seroka said, “Empty containers are in enormous demand at origin, creating a push to hurriedly fill vessels with as many exports and empties as possible before returning to Asia. Thus they can reload and immediately send back full to the United States.”
He said the recent “historic surge of cargo volume has been placing unprecedented stress on every aspect of the logistics industry, from manufacturing facilities to store shelves and everywhere in between. The outbreak of the COVID-19 pandemic earlier this year led to a plummet in cargo volume as much of the global economy ground to a halt. However, all of that has changed since factories restarted in China and other Asian locations, and the severe backlog of cargo that sat idle in warehouses began to move over the last several months, driven by strong growth in consumer buying along with other omnichannel distribution networks.
“Since the summer, we have moved to the other end of the spectrum when it comes to trade volume. We’re now experiencing a surge in imports as businesses make up for lost time and race to restock shelves and warehouses ahead of the holiday shopping period. China in particular is fueling this wave after months of economic lockdown,” Seroka said.
He said LA’s marine terminals “are getting squeezed from both sides. Vessels are coming in very full and at a faster pace. They’re also looking to turn back to Asia as quickly as possible. On the other side, we see trucking and railroad resources that are stretched thin. At local warehouses that are at or near capacity and experiencing reduced staffing due to physical distancing requirements, this has dramatically slowed the ability to absorb cargo and return equipment such as chassis and containers back to the system.
“With cargo coming into terminals much faster than it’s going out, containers are accumulating in large numbers, with fewer and fewer places to put them. The volume makes it difficult and time consuming to move cargo through the marine terminal yard. This in turn backs up the operation and slows down the unloading of shipments from vessels onto terminals and limits the availability of vessel berths,” Seroka said.
He said The Signal data indicates November volume will be strong.
“Depending on a variety of factors from origin to destination, we may approach 900,000 twenty-foot equivalent units for the month, which would represent about a 23% increase from last November. Much, however, does depend on the fluidity of the supply chain and the ability to get the ships in and out of berth,” Seroka said.
“Our early estimate for December is approximately 835,000 TEUs, which would be about a 12% spike from December of ’19. But also please remember, we hit a real cliff in the fourth quarter of 2019 following the rush of imports that tried to avoid the taxation of future tariffs against China trade,” he said.
“Using these projections, our current 2020 year-end estimate is approximately 9.1 million TEUs, which would come in about 2% lower than last year,” Seroka said. “When we look where we were earlier this year, I don’t think many would have projected this type of an outcome,”
Seroka was asked to look ahead to the incoming Biden administration.
“What I expect to happen is we’ll have a seat at the table. We’ll be able to redevelop relationships at executive and senior levels, very similar to what we participated in during the Obama administration. And I like our chances to get topics of importance to all of our stakeholders … to get in front of the administration so we can talk about how to grow trade and create jobs,” he said.
“There will be a long list of items to discuss with the incoming administration and their leadership. I have long advocated against the tariff regime and the weaponization that was used for and the obvious impact it’s had on trade,” Seroka said.
Seroka ended the pre-Thanksgiving press conference by saying he was “thankful for the nearly 100,000 folks who go to work every day at this port locally on our docks and those folks having been delivering goods to each and every one of our 435 congressional districts throughout this pandemic without stop. The women and men of the ILWU, our truck drivers, terminal operators, harbor department staff and so many others who we partner with every day of the year, thank you.”
He also expressed his “deep appreciation for all of our front-line health care workers. Through the volunteer efforts of Logistics Victory Los Angeles (LOVLA) and our volunteer team … we’ve been able to distribute more than 3.1 million units of personal protective equipment and other supplies to more than 36 Los Angeles-area hospitals and 150 skilled nursing facilities.
“I’m also heartened by the generosity of so many of our partners who have made a difference with their donations via LOVLA, companies like shipping giant CMA CGM, the Apple Corporation, Harbor Freight Tools right here in Southern California, Operation USA of Wilmington and Toyota,” Seroka said.