Port productivity remains a significant obstacle to the US supply chain as billions of dollars of products are well established or landlocked, and the shift to using East Coast ports over West Coast ports creates new pressures.
In the past three months, vessel capacity between the Far East and the East Coast of the United States has increased 18.9% year-on-year, according to marine and air freight research firm Xeneta. While the West Coast still leads 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.
In the past three months, container capacity on the West Coast has fallen 1.7%. This has an impact on the trucking and rail carriers serving the West Coast because the volume of containers is less to move around. Rail company BNSF, owned by Berkshire Hathaway and Union Pacific, specifically serves West Coast ports. On the flip side, it’s a boom in rail and truck service on the East Coast with increased volume. Norfolk Southern and CSX are the two rail companies that serve East Coast ports. Unlike rail, trucking companies have the ability to serve both coasts.
A truck transports a shipping container at the port of Savannah, Georgia.
Paul Hennessy | Light Rocket | Getty Images
“With more ships and cargo heading east, there has been an 11.9% increase in volumes so far this year, with a 7.3% increase year over year in May alone,” said Peter Sand, head of shipping for Xeneta. “That puts pressure on capacity, and there’s 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 some breathing room to recover.”
The lack of breathing space and delays in container delivery can be traced back to a ship’s total transit time – the time it takes a ship to get from the port of origin to docking at the port of destination.
Time is money, and a vessel or container at rest takes both out of the supply chain for faster use. It is also one of the driving factors for the rise in container prices.
According to Project44, the average transit time from China to the West Coast prior to 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, travel time is now down to 24 days,” said Josh Brasil, Vice President of Supply Chain Insights at Project44. “So we are in a good place now on the West Coast, but again, moving to the East Coast, those transit times have gone up. The increased transit time tells us that there are more delays in the port due to congestion. Unfortunately, with more ships connecting to the East Coast, we are in a good place now. In the coming months, we expect the bottlenecks to continue.”
CNBC’s supply chain heatmap tracks the increasing flow of trade from the West Coast to the East Coast and the congestion it creates.
Wait times in Savannah have increased for 10 consecutive weeks, according to Alex Charvalias, head of in-transit supply chain vision at MarineTraffic. That’s from one waiting day in May 2022 to more than 13 days currently. With no signs of relaxation in the following weeks,“ 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 are currently arriving on time (18.7%).
“Ports in Europe and China are bigger and automated, so they are able to handle disruptions better,” Brazil said. “These ports have driverless chassis trucks to pick up those boxes, and it really speeds up the process of unloading and loading ships,” he said.
In China, the ship may be processed in as little as a day, according to Brazil. In Europe, it may take up to two days. But in the United States, for the port of Los Angeles and other ports, it may take four to six days.
Automation is an issue in ongoing contract negotiations between West Coast Ports and the dock workers union.
“So there’s kind of a big difference there in terms of what automation can do,” Brazil said. “Automation is a controversial topic because there are jobs associated with it. That’s going to be a topic of contention for a long time to come.”
CNBC Heat M . Supply ChainaThe data providers p are artificial intelligence and predictive analytics company Everstream Analytics; Freightos global freight booking platform, creator of the Freightos Baltic Dry Index; logistics provider OL USA; supply chain intelligence platform FreightWaves; supply chain platform Bloom Global; Orient Star Group for third-party logistics services; marine analytics company MarineTraffic; Marine Vision Data Corporation Project44; shipping data company MDS Transmodal UK; Measuring sea and air freight rates and market analytics platform Zenita. Leading provider of research and analysis Sea-Intelligence ApS; Crane Global Logistics. and Air, DHL Global Forwarding; freight logistics provider Seko Logistics; and the planet, Providing daily satellite imagery and geospatial solutions.