As East Coast ports add to Chinese trade, more supply chain bottlenecks
Port productivity remains a huge impediment to the U.S. supply chain, as billions of dollars worth of products are anchored or landlocked, and the shift to using east coast ports rather than west coast ports creates new pressures.
Over the past three months, vessel capacity between the Far East and the US East Coast has increased 18.9% year-on-year, according to sea and air freight research firm Xeneta. While the West Coast continues to lead the Far East container market share at 59.8%, it continues to lose more capacity to the East Coast as logistics managers move away from the west coast for fear of a labor strike.
Over the past three months, container capacity has also fallen 1.7% on the West Coast. This impacts trucking and rail companies serving the West Coast, as there is less container volume to move. The BNSF railway company, owned by Berkshire Hathaway, and Union Pacific, specifically serves ports on the West Coast. On the other hand, it’s a boom in rail and road services on the East Coast as the volume increases. Norfolk Southern and CSX are the rail companies serving the East Coast ports. Unlike rail, trucking companies have the ability to service both coasts.
A truck picks up a shipping container at the Port of Savannah in Georgia.
Paul Hennessey | light flare | Getty Images
“As more ships and cargo head east, there has been an 11.9% increase in volumes so far this year, with a 7.3% year-on-year increase in May alone,” said Peter Sand, shipping manager for Xeneta. “It puts pressure on capacity, and there is a price to pay in terms of reliability. So in a way, the East Coast becomes a victim of its own success and the West has the breathing room to recover somewhat .”
Lack of respite and delay in container delivery can be tracked by a ship’s total transit time – the time it takes a ship to travel from its port of origin to its mooring at the port of destination.
Time is money, and an idle ship or container removes both from the supply chain for faster use. It is also one of the driving forces behind the rise in container prices.
According to Project44, the average transit time from China to the West Coast before the pandemic was less than 20 days to 25 days on the West Coast; and 38 days on the East Coast.
“For the West Coast, the travel time is now down to 24 days,” said Josh Brazil, vice president of supply chain insights for Project44. “So we’re well positioned right now on the west coast, but again moving to the east coast, those transit times have increased. The increase in transit time tells us that there are more delays to port due to congestion. Unfortunately, with more ships calling on the east coast in the coming months, we expect the bottlenecks to continue.”
The CNBC Supply Chain Heatmap has tracked the increase in trade flows from the West Coast to the East Coast and the congestion it is creating.
Wait times in Savannah have increased for 10 straight weeks, according to Alex Charvalias, supply chain in-transit visibility manager at MarineTraffic. This goes from a single day of waiting in May 2022 to more than 13 days currently. “No signs of easing in the weeks that followed,“ Charvalias said.
Sea-Intelligence reports that congestion on the East Coast has now deteriorated to the point that less than one in five container ships currently arrives on time (18.7%).
“Ports in Europe and China are bigger and automated, which allows them to cope better with disruptions,” Brazil said. “These ports have driverless chassis trucks to pick up these boxes, and that really speeds up the process of unloading and loading ships,” he said.
In China, a ship can be processed in less than a day, according to Brazil. In Europe, it can take two days. But to United States, for Los Angeles Port and other ports, it may take four to six days.
Automation is one of the issues in ongoing contract negotiations between the West Coast ports and the Dockworkers’ Union.
“So there really is a big difference in terms of what automation can do. Automation is a controversial topic because there are jobs associated with it. It’s going to be a divisive issue for a long time,” Brazil said.
The CNBC Heat M Supply Chainap the data providers are the artificial intelligence and predictive analysis company Everstream Analytics; the global freight booking platform Freightos, creator of the Freightos Baltic Dry Index; the logistics provider OL USA; the FreightWaves supply chain intelligence platform; the Blume Global supply chain platform; third-party logistics provider Orient Star Group; the marine analysis company MarineTraffic; marine visibility data company Project44; shipping data company MDS Transmodal UK; Ocean and Air Freight Rate Market Benchmarking and Analytics Platform Xeneta; leading research and analytics provider Sea-Intelligence ApS; worldwide crane logistics; and air, DHL Global Forwarding; freight logistics provider Seko Logistics; and Planet, provider of daily satellite images and global geospatial solutions.