Ridin' the Storm Out

Massive disruption in the US Container Market

Long lines, extra costs, and further delays continue in the US market for importer and exporters using ocean and rail services. A variety of factors are leading the current Ocean Container shipping into another perfect storm. The effects of this storm are proving to be nearly on par with the port strikes that occurred in 2015.

Let’s start with what shippers are currently experiencing in this storm:

  • Drastically increased transit times for imports and exports inland and on the coasts
  • Excessive transfer times between transfer modes (sea to rail and rail to road)
  • Equipment shortages in both the chassis and container markets
  • Increased accessorial charges due to chassis fees, wait time, per diem, and demurrage
  • Truck shortages

According to the Pacific Merchant Shipping Association (PMSA), average dwell times at west coast ports and on the streets are much higher than the average for the entire year. Simply put, containers are sitting at transfer points much longer before being moved to the next stage of their transit. Unfortunately, the equipment stagnation isn’t just being experienced at ports and rail depots. According to data from the Journal of Commerce (JOC), full and empty containers are also sitting on chassis on "the street"/at warehouses and yards for almost 2-3 times longer than the annual average. The buildup of containers on hand at ports is leading to a drastic increase in usage rates for port equipment, and is leading to bottlenecks and long lines for truckers both in retrieving containers and returning them. This, in turn, is leading containers both in the port and out of it to sit, accruing per diem and demurrage charges in line with steamship contracts that, unfortunately, are the responsibility of the shipper/consignee. The marketplace is certainly letting the ports, rails, and steamship lines hear their frustrations over these costs and their unfairness, but no relief has yet been granted. Some believe the US government may step in.

Unfortunately, this storm is nearly perfect in that it is occurring in a unique market environment and each factor is exacerbating another. In the months leading up to the current situation, carriers, terminals, and ports were configuring schedules, asset locations, and utilization plans to match historical shipper demands at year end. Then a huge spike in unexpected shipping demand started the storm. From what? Increasing US-China Import Tariffs with a proposed effective date at year-end. This meant that forecasts by ports, rail carriers, and steamship lines were drastically underestimated

Eventually, the impacts hit. An already strapped trucking market receives more shipments to handle, warehouses overflow with product being brought into the US to avoid tariffs and chassis are now holding fully loaded containers as warehouses try to create space, often to no avail; here enters the chassis shortage. This surge pushed utilization rates beyond their effective limits and stressed the system. The effects at the beginning of this article are the evidence of this stress.

Sadly, just when the market would have typically started to recover, enter two more perfect storm factors. First, a second surge in demand (this time forecasted). As Chinese New Year, set for February 2019, began to approach. Shippers pushed freight at high rates as usual to beat the short-term disruption in their supply chains that results from China’s near shutdown. Again, the nation’s shipping system is pushed to its brink and beyond and the situation worsens. Then, as if on cue, a literal perfect storm hits the nation. The 2019 Polar Vortex hits much of the US, causing thousands of closures from terminals to warehouses, equipment failures, and inefficiencies.

Transit times after these two impacts continue to increase, as do the associate accessorial fees for unforecastable charges from ports, terminals, and carriers. While forwarders & shippers continue to do what they can to limit the overall disruption, solutions are somewhat limited largely because of both macro and micro causes of the situation. Even routings through alternative ports such as Canada are still impacted by the weather, increase in their volumes from other like-minded companies, and the inevitable equipment shortage and turn time delays being experience at nearly every final destination port and terminal.

For more information on these topics from a completely independent source, we would strongly recommend the following articles by the JOC – Journal of Commerce.

“LA-LB port congestion shows signs of ebbing” - https://www.joc.com/port-news/us-ports/port-los-angeles/la-lb-port-congestion-shows-signs-ebbing_20190130.html

“Long tail of US chassis shortage snaps shippers” - https://www.joc.com/trucking-logistics/long-tail-us-chassis-shortage-snaps-shippers_20190122.html

“Storm to compound Chicago rail congestion” - https://www.joc.com/rail-intermodal/class-i-railroads/union-pacific-railroad/storm-compound-chicago-rail-congestion_20190129.html