US port congestion driving long-term changes to trade routes

Although the Asia-to-Europe sea lanes captured recent attention, bottlenecks and changing production centres are creating waves in US import routes as well

The Covid-19 pandemic has highlighted potential problems for shippers with the over-reliance on a handful of trade lanes, an issue exacerbated by the increase in international cargo transport options.

The impact of the pandemic and deteriorating China-US relations have highlighted a lack of capacity at the ports of Los Angeles and Long Beach, which are typically the ports of entry for goods destined for the US Midwest.  The import surge in the latter half of 2020 has led to long waiting times for unloading, extended dwell times caused by equipment and staff shortages, and delays in dealing with empty containers or repositioning them for export loads. Furthermore, container shortages and delays have impacted on US agricultural exports. Firms have been slow to respond to these difficulties and to take advantage of alternatives.

An inability to look for new options has led US importers to miss opportunities elsewhere, for example, the expanded Panama Canal which now provides options for ships up to 50% larger than those previously handled by the canal.

East Coast ports are in the process of improving infrastructure to offer a better service. The Port of New York-New Jersey is experiencing a $3bn investment over 15 years. The port of Virginia has invested in automatic stacking cranes, new rail sidings and operations software, and platforms which can help trucks get in and pick up their cargo in shorter times with reduced queues.

With firms relocating their production away from China to Southeast Asia, the ocean routings via the Suez Canal (notwithstanding the recent blockage) and the East Coast ports are becoming more competitive. The Suez Canal route looks favourable for locations such as Singapore when the lower congestion and higher throughput of eastern ports and their closeness to the economic centres of the Midwest and Ohio Valley are factored in.

Re-examining routes to avoid the congested ports to reach the Midwest, companies could look at a faster service from Southeast Asia via Virginia’s ports. Too often logistics is not given enough attention, leading to a siloed approach. A newly focused approach to last call and first call port selections can cut days of transit times. In mid-February 2021 shipping could have avoided as much as an eight-day wait to discharge cargo at Los-Angeles-Long Beach by transferring to Seattle-Tacoma, which had ample capacity at that time.

Alternatively, shippers can ignore the US altogether and route cargo via Vancouver or Prince Rupert in British Columbia. The journey from Shanghai to Prince Rupert can take just nine or ten days, beating the new express services to Los Angeles and Long Beach by several days. Volume to the Canadian ports in recent years has increased due to lower intermodal transit costs to the US Midwest.  With cost savings of up to $400 to $600 per container via the Canadian ports, further share erosion in their favour is likely.

Ports along the Gulf Coast might also increase their attractiveness when the population growth of Texas is taking into account. The Texan population is booming and six of the top 10 US states in terms of population growth are in the south or southeast, as are five of the top 10 growth markets. Amazon is planning 33 large warehouses in the US of which only eight will be located in the western states.  The remainder will be built in the Gulf region, the East Coast and the Midwest.

Upgrades to the ports of both Texas and New Orleans will allow larger ships to use them.


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