The global supply chain and specifically the ocean freight industry and ports and terminals have gone through a very trying and tough time in the last two years.. Starting with COVID-19 which was the genesis of the unprecedented supply chain disruption, the industry has seen many issues, especially at the US ports..
A record number of ships were lined up outside many US ports for a berth for many months in 2021 increasing the port and yard congestion across the country.. Increased container dwell times also caused dockworkers and truckers to struggle to keep up..
US ports have come up as some of the most inefficient ports in the world per container dwell time.. Other regions of the world, like the APAC region, have managed to not only keep containers flowing smoothly through ports but have cut their container dwell time considerably..
9 out of the Top 10 container ports in the World are in the APAC region with 7 of them in China, 1 in Singapore, and 1 in South Korea.. 1 port in the EU (Rotterdam) made it to the Top 10.. The first US port in the list of Top 100 container ports is Los Angeles at Number 17..
The question is, what are they doing so differently than the US that is enabling them to pump out containers..??
The Drastic Import / Export Imbalance
One of the most important things to consider when looking at the total container turn-around time between Asian and American ports is their throughput in terms of imports and exports.. It’s decidedly quicker to load a container full of items to export onto a ship than it is to unload and, subsequently, offload a container full of foreign imports..
“China currently sells four times what the United States sells to it. Given China’s systemic production cost advantage, which now averages 30% to 35% even when shipping costs are included,” says a recent article from the Harvard Business Review.
“Beijing’s determination to replace imports of America’s superior technology-intensive products, such as semiconductors and jet aircraft, with its own, nothing short of a ceiling on total U.S. imports from China is likely to reduce the trade gap.“
The export to import ratio between the two different countries can play a considerable role when it comes to how quickly a backlog can be cleared..
A Lack of Necessary Infrastructure
Over the past few years, pre-COVID, many of the headlines in maritime news were about investments in Asian port infrastructure.. As part of its One Belt, One Road initiative, China has purchased ports all around the world.. Which contributes to the US port lag in a few different ways..
The first is simply the ripple effect created by the port overload.. Los Angeles and Long Beach, despite being the 1st and 2nd largest container ports in the United States, were never meant to receive the influx of cargo that came about due to the pandemic-induced demand spike.. This alone has caused a severe delay in the US supply chain, which has since rippled throughout inland distribution systems..
Transloading, for example, has transitioned from loading ocean freight containers onto trains to unloading cargo directly into domestic trucks close to port.. This helps carriers as it reduces the turn-around time to return containers for Asia, which has become a very lucrative practice.. However, the practice only continues to introduce delays into the US supply chain as distribution centers close to the ports are having to deal with shipping containers when they are set up to receive trucks..
A Decided Difference in the Workforce
In addition to Asian ports exporting more than they’re importing, and their imports primarily directly transloaded for transport to inland distribution facilities, there’s also the workforce angle to consider..
One of the most significant advantages to Asian ports is that they run round the clock, versus American ports, which operate just two shifts a day and are often closed on Sundays.. While the Los Angeles port has started to work around the clock a few months ago to try and contend with the cargo overflow, this is not, and likely never will be, the norm for U.S. port operations.. This is because longshoremen, or dock workers, are heavily unionized in the United States..
What makes the situation all the more tenuous is the fact that the International Longshore and Warehouse Union, ILWU, is set to begin negotiations for new multi-year contracts in 2022, which occurs in roughly a six-year cycle..
During the last negotiation cycle, in 2014-2015, there were severe labor disruptions and shipping delays leading to port congestion..
Now, as ports face the worst congestion levels in memory, with many container ships still waiting to berth and unload more cargo, negotiations are set to begin again..
According to a recent article from the Wall Street Journal, the ILWU has “rejected an offer from port terminal operators to delay negotiations until 2023.” Understandably, employers want to extend current contracts due to a threat of disruption in the already strained supply chain..
“During the talks that began in 2014 and dragged into 2015, dozens of ships backed up off Southern California causing delays that cost individual retailers millions of dollars in increased costs and lost sales,” according to the WSJ. “In 2002, employers locked out workers for 10 days at one point before President George W. Bush invoked the Taft-Hartley Act covering oversight of union activities to open up ports.”
There are several differences between APAC ports and those in the United States.. The key takeaway is that in the end, it will come down to infrastructure and investments.. APAC ports are better staffed, better equipped, and all-around more efficient than those in the United States..
If the US wants to not only catch up but prevent anything like this from happening again, considerable changes will need to be made.. None of which can happen overnight..
The post How US ports may have contributed to the global lag in container turn around times appeared first on Shipping and Freight Resource.