UPDATED: COVID’s container cargo congestion complications

Wild demand fluctuations in 2020 creating serious port logjams in 2021

Freighters waiting to unload cargo in the Port of Vancouver. Congestion resulting from 2020’s erratic transpacific trade spikes is being felt at ports up and down North America’s West Coast | Chung Chow

B.C. ports could benefit from congestion at major U.S. West Coast ports as container cargo shippers look for alternative entry points to the North American market.

2020’s wild pandemic ride for ocean carriers tops the list of factors driving that congestion at California’s Los Angeles-Long Beach San Pedro Bay port complex.

Its second-half surge in consumer demand has strained a supply chain compromised by what Weston LaBar, CEO of the Harbor Trucking Association (HTA), said is “a systemic labour shortage. It’s been complicated by COVID. But essentially, we don’t have enough skilled longshoreman.”

He added that a shortage of trucking capacity has resulted in supply chain congestion spilling over into the region’s warehouses and distribution centres.

The HTA is a coalition of intermodal carriers that service U.S. West Coast ports.

The number of container and other cargo ships anchored in the harbour waiting for berth space at San Pedro Bay, the world’s ninth-largest container shipping hub, ranges between 30 and 60 per day.

The Los Angeles-Long Beach container ship backlog has been exacerbated by a COVID-19 outbreak that, as of late January, had infected approximately 1,000 dockworkers.

2020’s combination of a second-
half transpacific surge in demand following its first-half pandemic trade drop and the subsequent spike in cancelled sailings has stranded empty shipping containers in some ports and slowed their return to shippers and terminals that need them in others.

That empty-container imbalance has worsened terminal congestion as ships often leave port without being fully reloaded because their scheduled time at berth has expired. Piles of unreturned empty containers left in their wake clog terminal storage and complicate container movement.

The production of new containers has also been disrupted by 2020’s tale of two trade halves.

It dropped 36% in 2020’s first six months compared with the same time in 2019, according to the senior analyst for container equipment at U.K.-based shipping consultancy Drewry.

But John Fossey emphasized during Drewry’s February 9 shipping container equipment update that 2021’s container shortage has more to do with “hiccups in the current supply chain as a consequence of COVID-19” than a lack of investment in new equipment.

Chris Ng, marketing and sales vice-president for Vancouver’s GCT Global Container Terminals Inc., said those hiccups are not exclusive to North America.

“Every segment of the supply chain is now experiencing bottlenecks, not just here in North America, but over in Asia. Ships [in Asia] are departing late as well. So it’s almost the perfect storm.”

GCT operates the Port of Vancouver’s GCT Deltaport and GCT Vanterm container terminals.

Ng estimated that between two and three ships might be backlogged in Vancouver on any given day compared with 10 times that number in California. But he added that 2020’s first half lockdown economy followed so suddenly with its second half spike in transpacific trade has complicated container handling up and down North America’s West Coast.

“If you take the lowest point in Q2, which was March, compared to our highest month in October, throughput grew by 50%.”

The gap in L.A.-Long Beach in 2020 was closer to 85%.

A normal seasonal throughput gap in Vancouver ranges between 18% and 24%.

Ng estimated that, in effect, Vancouver handled a full year’s container traffic in 2020’s last six months.

Ram Chungh, Vancouver Fraser Port Authority (VFPA) senior communications adviser, added that West Coast congestion challenges underscore the need for more container-handling capacity at the port’s Vancouver and Roberts Bank container terminals.
However, 2020 has been a year like no other in so many respects that it is hard to predict that it will be a new normal for marine cargo operations. 
Alan Murphy, founder and CEO of Denmark’s Sea-Intelligence, described the transpacific trade loop in 2020 as an “absolutely wild ride” for ocean cargo carriers, shippers, ports and terminals. Speaking at a recent Journal of Commerce container shipping outlook forum, Murphy said servicing the precipitous monthly declines in trade of up to 16% and widespread cancelled sailings during the first six months, followed by a second-half 2020 demand surge that ended with a 30% increase in December, “is incredibly hard to cater for.”

The Port of Los Angeles moved 9.2 million 20-foot-equivalent units (TEUs) in 2020; its sister Port of Long Beach handled 8.1 million TEUs in a year that included the best four months and most active quarter in its 109-year history.

In B.C., the Port of Prince Rupert handled a record 34.4 million tonnes of cargo, 9% more than in 2019; total cargo moved through the Port of Vancouver (PoV) in 2020 increased 1% to 145.5 million tonnes compared with 2019. The PoV’s container cargo volume increased 2% to 3.5 million TEUs compared with the previous year even though it had dropped 7.7% in 2020’s first half compared with 2019’s first half.

Murphy said the “absolutely exceptional” transpacific cargo growth from September to November was driven almost entirely by consumer demand in the United States, where service industry spending collapsed in the face of pandemic travel restrictions and lockdowns and disposable income shifted to physical goods.

Major product winners as goods consumption increased 3.8% in 2020 compared with 2019 included home office furniture, washing machines, gardening equipment, sports and exercise equipment and video game consoles.

Biggest losers as services consumption dropped 7.3% were travel and related products, jewelry and commodities for food preparation used in restaurants and commercial kitchens.

Another big loser has been shipping reliability.

Murphy called it the “absolute worst” in 10 years.

“Not quite as bad as in the first quarter of 2015, during the U.S. West Coast [longshore] labour dispute, but it is still horrendous.”

He said that less than 30% of transpacific container ships are arriving within one day of their scheduled arrival and delays of five days are not unusual.

Murphy added that Vancouver and other Pacific Northwest ports would not provide shippers with any significant alternative advantage to California ports, especially if their goods are destined for Texas and other southern states.

“If you move your cargo to Vancouver, now it’s in Vancouver. Is that where you want it? … Of course, we’ve got good rail out of Vancouver … but you can’t get to Texas. … Then we’re just moving the problem inland, and then the containers are stuck there.”

Murphy said congestion is now also stalling container cargo movement at ports in the Pacific Northwest.

“It’s all the same. You’ve got the same kind of vessel delays, the same kind of reliability going into the [Pacific Northwest] as you do going into the California ports.” •