The headline makes you think that things are worse. However, in one way they’re better. Apparently ocean carriers are making a concerted effort to move empty containers out of LA and Long Beach Ports. And that will make a big difference in yard space at terminals.
Figures show that from late October and January 27, there have been 27 sweeper voyages from LA, carrying 68,000 empty containers to Asia, and 29 from Long Beach, carrying 76,000 empties. It sounds like a lot.
Ocean carriers certainly want to avoid the proposed fees at these two ports for letting empties sit in a yard. At times recently around 45% of the containers in the yards at LA and Long Beach have been empties.
However, when you consider that there are more than 600,000 containers per month coming into LA and Long Beach, the number removed does not seem that high— less than 23,000 per month on average from LA and 24,000 per month from Long Beach. It seems that more work is needed. And more jawboning.
And it’s important to also encourage exports using those containers. We don’t want empties being scarfed up when they could be used for exported products, say agricultural products, which are plentiful in California. The effort to create a port-based empty container filling station for ag products on the West Coast could help, but most ag products sail bulk to the Far East.
But I think more pressure on ocean carriers and others is still necessary.
This interesting article suggests that slot management across supply chain entities could help ease the current supply chain congestion woes. It’s an attempt to define this concept that could induce more cooperation between firms and supply chain entities such as ports, terminals, and hauliers.
There’s no question that today’s world of maritime logistics and supply chains is dominated by decision-making for the benefit of each individual participant. The flow of goods overall could be improved by introducing a discipline that would make decisions for the common good look better.
The article leaves open the question of how to induce the players to participate.
We already see signs that some large shippers have already decided not to play on the same terms. Firms like Home Depot, Walmart, Amazon, and IKEA are trying out chartering their own ships and selecting their own ports, terminals, and inland transport to make their specific supply chains work better. This individual management could bring gains especially for them, and there’s a chance that if enough of it happens, some of the major bottleneck ports such as Shanghai, LA/Long Beach, and Rotterdam could see a reduction of traffic enough to lower backlogs and congestion. And the smaller ports these individual shippers might use, such as Seattle/Tacoma, Norfolk, and Savannah, will see increasing traffic and congestion. If they have the capacity that’s ok, but if not the woes will continue.
These are just examples of how not to participate.
I agree with the authors that just allowing market principles to work won’t create the gains in throughput we need to see. The markets don’t work fast enough to prevent hardship and business and personal failure.
A suggestion made earlier was for a system to ‘label’ each container (in the paperwork, and perhaps physically on it, like the priority mail labels in the US mail) with a service level standard required for this container. Those handling the container would know its priority and could adjust their individual workflows to meet the standard delivery time. Even if there were bottlenecks, the standard would help those in a position to relieve one to see which containers needed to be handled or placed first, second, and so on.
I submit that introduction of a world-wide slot system for maritime container transport needs to be accompanied by a system to reallocate the benefits and costs of the system. There need to be charges or inducements at ports and terminals to get players to fit their needs and actions in with the slot optimization system.
In fact, any system that would operate throughout whole maritime value chains needs to have the incentives designed along with the tracking or resource allocation system.
A worthwhile start would be a model of a realistic slot allocation system and its effects on, say the current congestion worldwide at ports and in hinterland supply chains. Not an easy study to conduct, but it would show where inducements need to be given, and where penalties need to be put, to prevent or reduce gaming the supply chain. Experiments with inducements could be made to gauge their effect and help choose the right ones.
American Shipper has done a very nice article showing that LA/Long Beach is actually slowing down in throughput in the last two months or so. The graphs from their SONAR statistics show clearly that container processing is bottlenecked at those two ports.
It’s also true that both the port management at Los Angeles and Long Beach has emphasized the overall gains in 2021. But most of that was accomplished before the end of the year,and there has been a dramatic slowdown recently.
One issue that has only recently been mentioned is the large excess of empty containers at these two ports, waiting to be exported back to the Far East. These empties get in the way of unloading and loading real cargo.
Ocean carriers are recalcitrant about taking on the empties, as they don’t pay any fare. And it’s almost cheaper to build new containers in China for Chinese exported goods, than it would be to carry them back. So there is little economic incentive for those containers to be returned. And ocean carriers can’t be ordered to take them by any government.
One option for the ports of LA and Long Beach is to actually enforce fines per day on empty containers not taken by ocean carriers. These have been discussed previously and keep being passed on by the Port Boards.
Another option is for the Ports to declare that any empty container left in the port for more than some number of days will be scrapped for the steel, and the container owner charged for the cost of scrapping. The value of the sold metal could accrue to the port, or could be paid back to the original owner, according to the politics. I’d favor the port keeping the scrap money.
China has been accused of dumping steel in the US before. Now China is dumping fabricated steel in the form of containers. It’s not sustainable to have these boxes build up beyond a point where they interfere with import and export of real goods.
Greg Miller, Senior Editor Thursday, January 27, 2022
Supply Chain and Logistics 