POV: The purse strings are frayed – and U.S. trade is held hostage

The inverse relationship between trade price and overall service continues to reverse – and don’t expect that trend to change anytime soon.

Despite the rhetoric, the historic amount of imports from Asia negates any reported “success” of long-lived containers being evacuated from the Port of Los Angeles. Executive Director Gene Seroka told American Shipper that the port’s land capacity remains at 100%. Ideally, this percentage should be in the 70s for efficient container transport.

“We underutilize opportunities to move containers off our docks,” Seroka explained. “We dug into our data and unused truck appointments jumped from 30% in the summer to 55%. The frames are immobilized in the street for 11 days. The dwell time of import containers in the terminals is six days.

“Meanwhile, rail providers now have 40% excess capacity. We need to do much better using our rail assets.

In the table below, the empty rectangles represent the available truck appointments. Filled rectangles represent filled appointments.

Pointing fingers and political promises and suggestions do not improve the flow of trade.

The reality is clear – until ocean carriers, terminals, warehouses and truckers put everything aside and are honest about how to rectify the situation, trade will continue to move at a lazy pace.

This game of port responsibility impedes the advancement of trade movement. Vessel congestion and its impact on safety and air quality in the San Pedro Bay area has led to new queuing measures that have lengthened transit times.

Freightos.com Data shows that the average monthly end-to-end transit time for China-US ocean shipments hit a record high of 80 days in December.

Here’s what it shows: 50% more than in December 2020 and 85% more than in 2019.

The Asia-West Coast rate is 169% higher than the same period last year. East Coast Asian and US prices climbed 6% to $17,476 per forty foot equivalent unit and are 190% higher than rates this week last year.

Idle trade does not make money.

All elements of a port must be at optimal levels for ships to enter and leave efficiently. The biggest impediment to trade flow out of the ports of Los Angeles and Long Beach is the fact that they are proprietary ports.

Two inland players in particular, terminal and chassis operators, have agreements with ocean carriers on everything from the amount of container “free time” importers can have at the port (which adds to the inland capacity problem ) as well as chassis and empty container restrictions (which dictate what type of container can be picked up or dropped off).

Until the shipping carriers change these agreements, congestion and charges will continue within the trucking industry. Add to that the lack of warehouse workers and automation and it’s a business cement cocktail.

This can easily be tracked by MarineTraffic as a vessel is in port.

Although the entry of smaller container ships calling at the Port of Los Angeles has reduced the number of TEUs handled at the port, it has not helped the port gain in efficiency. The frames are cemented outside the port. According to the dwell times of the chassis in the terminals and on the street, the chassis are in container purgatory.

The latest push by the Port of Los Angeles to free up land capacity is the threat to charge shipping carriers a levy on long-lived empty containers. Some improvement is recorded – but, again, the port is still at 100% capacity.

In the table below, the empty rectangle represents empty container levels as of November 15. The filled rectangle represents the current quantity.

What we see here is like trying to dig a hole in quicksand. The inbound container volume cancels out any “earnings” in the outbound containers.

The Pacific Maritime Association told American Shipper, “Historic supply chain congestion highlights the vital role West Coast ports play in the U.S. economy and reinforces the importance of every link in our supply chain. of supply: warehouses, trucks, trains, truck chassis and other equipment, in addition to maritime terminals.

“Each of these must work efficiently and in concert, with sufficient manpower, to relieve the congestion that is slowing the movement of goods across the country.”

So what does this lack of productivity mean for the supply chain? Inflation.

Importers pay more for horrible service and for those who borrow, the interest they pay on these products is passed on to the consumer, fueling inflation.

Based on the marine and logistics visibility company Project44’s breakdown of an average freight value of $40,000 per twenty-foot equivalent unit out of the Port of Los Angeles, shippers found themselves paying about $106 per TEU per month against a financing cost of 3.2%.

A breakdown of project data44 shows an average of 540,255 TEUs per month expected outside the Port of Los Angeles in 2021 with an average of 377 container ships per month waiting at anchor for a berth.

Another disturbing trend in container movement out of the Port of Los Angeles is the increasing dwell time of US export containers. The increased dwell time is a physical reminder of shipping carriers taking empty containers on US exports.

US exports hit a 17-year low from the Port of Los Angeles, but empty containers exported increased. This is the direct result of commercial decisions by shipping carriers. This is another monetary lever in the flow of trade that is locked in and will only be released when shipping lines start accepting exports in a timely manner.

Instead, we heard praise from the Biden administration about the Port of Oakland opening a new container yard for agricultural exports to access empty containers to use for exports. Los Angeles should have a similar measure.

“We are working with industry to review all export opportunities and utilize the many empty containers at our sea terminals,” Seroka said. “US exporters need access to containers to be able to move their product. The next step is to align with service providers on a geography-based approach.

But the reality of this solution is this: no matter how many opportunities west coast ports provide the agriculture industry for empty containers so they can be billed, it doesn’t mean they will be exported.

Ocean carriers must accept these exports on their ships. Based on the historical flow of US exports, which is controlled by foreign shipping carriers, the record speaks for itself. The decline in US exports from the country’s largest port is a stark reminder of the rollover of trade.

While these extra containers being made available are being hailed by the Biden administration as a win for the agriculture industry, it’s just empty political rhetoric until ocean carriers place the boxes on their ships.

For the proprietary ports of LA and Long Beach to operate effectively, every participant in the trade must sit down at the table and agree to act and work 100%. The finger pointing should stop.

It has been known for over a year now that US importers are not getting their money’s worth. Some participants in the trade make money in spades. American trade is held hostage and the purse strings of importers have lost all elasticity.

Accounts must be taken. No political rhetoric. Containers don’t lie.


Watch: Lori Ann LaRocco and the Flow of Trade

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