Port of Los Angeles diverts ocean carriers to reduce cargo backlog

‘Stalling the freight flow does not do anybody good,’ said port executive director Gene Seroka, saying there have been numerous discussions regarding the re-routing of cargo to make sure the American economy keeps moving.

The port of Los Angeles will see some incoming containerships diverted to other US west coast ports in an effort to reduce the backlog of cargo on vessels currently at anchor and awaiting berths.

The decision to divert ships from America’s premier port comes as the Federal Maritime Commission steps up its enquiry into congestion there as well as at the ports of Long Beach and New York-New Jersey.

“There have been several services that have been switched so far temporarily that will come back to Los Angeles,” port of Los Angeles executive director Gene Seroka told reporters on Wednesday.

“If we stopped all shipments right now, we would still have about a month’s worth of work from those ships at anchor,” he said. “We need to really catch our breath and go after this backlog of anchored ships with new and renewed enthusiasm.”

He said there have been numerous discussions regarding the re-routing of cargo, something being done to make sure the American economy keeps moving. “Stalling the freight flow does not do anybody good.”

“If we do nothing, we will still have vessels at anchor come mid-summer. So we have to take some of these steps and start moving,” he said. “Our goal is to keep chipping away at this and try to work down the numbers.”

Mr Seroka attributed the overwhelming number of imports to American consumers who have continued on an “unprecedented buying surge” that started in the past summer and that “has not slowed yet”.

“Retail sales numbers announced today are up 5.3% for the month of January, showing that the American consumer is continuing to spend,” he said.

As a result, the port is forecasting 730,000 teu for February, a 34% jump over the past year, and 775,000 teu for March, a 72% increase over 2020 when “we hit the abyss and moved only 450,000 teu”.

Meanwhile, he said: “We moved 835,513 teu in January, representing a 3.6% increase compared with last January. It is the sixth consecutive month of year-on-year increases driven by the one-way trade of imports.”

Exports came in at a “dismal” 119,000 teu — a 19.5% decrease compared with last January and exports continue to lag, dropping in 25 of the past 27 months in Los Angeles.

“The primary causes continue to be American trade policy, China retaliatory tariffs, and the value of the US dollar making our goods more expensive to buy than from other countries,” he said.

“We are still witnessing a rush to get empty containers back to Asia and pre-positioned for the next round of imports,” he said. Empties came to 278,000 teu in January, a 14.5% increase over the past year.

“Empty containers are more than double the amount of loaded exports on our docks,” he said. “These empty containers remain in very high demand in Asia, creating a push to hurriedly fill vessels with as many exports and empty containers as possible before returning to Asia.”

As of Wednesday, he said the two San Pedro Bay ports had 62 ships at anchor, 25 of them — including 20 containerships — bound for Los Angeles and the remaining vessels headed to Long Beach.

Under normal conditions, the port usually does not have any containerships at anchor, while there would be 10 to 12 containerships at berth, Mr Seroka said. Now, though, the port is working an average of more than 15 containerships a day at berth.

“About 15% of vessels that are currently on their way to Los Angeles are going direct to berth. Of the 85% of ships going to anchor, the average wait time has been climbing,” he said.

“When ships first started backing up in November, anchorage time was about two-and-a-half days. In February thus far, anchorage time is now tracking at eight days,” he said.

Dwell time on terminals remains at about five days or double what it was before the import surge started in the past summer and now stands at 7.6 days for a standard 40 ft container.

“That is quite high for us,” Mr Seroka said, adding that “we need to get back to about three-and-a-half days of on-street dwell time, where it was holding pre-import surge.”

“Truck and railroad resources continue to be stretched thin, in addition to the winter weather events that we have seen throughout the country over the last week,” he said.

“Local warehouses are at or near capacity and still experiencing reduced staffing levels due to the physical distancing requirements from our medical experts,” he said. “This has slowed their ability to absorb cargo and return equipment such as chassis and containers back to the port system.”

Meanwhile, as part of its investigation into congestion into the ports of Los Angeles, Long Beach and New York-New Jersey, the Federal Maritime Commission is issuing demand orders to ocean carriers and marine terminal operators.

The orders are being issued by Commissioner Rebecca Dye as the Officer for Fact Finding 29, and they target marine terminal operators and ocean carriers operating in alliances and calling the three ports.

The demand orders will require the firms to provide information on their policies and practices related to detention and demurrage as well as container returns and container availability for exporters.

The Commission initiated Fact Finding No 29, International Ocean Transportation Supply Chain Engagement, in order to identify operational solutions to cargo delivery system challenges related to coronavirus.

Source: Lloyd´s