USA Multimodal Supply Chain Update
Congestion, equipment and staff shortages, weather events and regulatory changes have all added to global pressures and impacted the US supply chain woes in 2021, with ocean freight and the twin ports of LA and Long Beach being hit the hardest.
US road freight has been struggling to keep up with capacity since the COVID-19 pandemic with a few contributing factors coming together to cause significant issues across the country.
COVID-19 has had a big impact on driver availability in the United States, whether that be through COVID restrictions, lockdowns, illness or personal choice not to return to work. As a result, demand for drivers outweighs current availability, driving up wages and passing costs on to the supply chain without an increase in output. Output continues to dwindle due to new regulations in place in the USA. America faces a different set of changes in regulations affecting its trucking industry. Stricter anti-drug enforcement and driving hour rules have caused a reduction in output from an already pressurised industry.
With driving schools unable to operate, or with lower capacity due to COVID-19, the next generation of drivers is struggling to obtain their licences to take on the void left by ageing drivers deciding to leave work. In the US there is a driver turnover rate of 92% - this shows the very real and rapid decline in driver availability, a factor further driving up costs to the industry and causing a severe drivers’ shortage.
Issues spanning the globe, including delays and shortages that have been seen throughout Asia and Europe have led to knock on effects in the States, with warehouses at capacity and cargo delays meaning that turnaround times for containers are longer, causing a shortage of trailer availability for drivers to pick up new containers.
The North American air freight industry has seen a 0.8% decrease in year on year growth in 2021 although, as per a report from Statista, the 2021 market size is predicted to sit at almost $123billion, up sharply from $103billion in 2019.
During 2021, many US retailers used to shipping from overseas and domestically, including the likes of Levi Strauss & Co. and Lululemon, looked to US air freight to offset the delays and bottlenecks elsewhere in the supply chain caused by a lack of labour, the Suez Canal blockage and COVID-19 factors in the first half of 2021.
The US air freight industry has since seen a recovery with increased scheduled flights and capacity to and from many locations, with some exceptions depending on current travel restrictions in place. However with warehouses around the country remaining at high capacity this is still affecting the supply chain of goods using air freight.
Possibly the worst hit area of the US supply chain network is the ocean freight sector, which is still seeing major delays across the board and struggling to keep up with increased demand.
2021 has been a tumultuous year for US ports, breaking records for wait times and capacity numerous times. A COVID-related backlog was not helped when storms across the States forced ports to reduce activity, further compounding the delays to vessel turnarounds.
With delays originating primarily from COVID-19 related challenges such as a lack of labour availability due to lockdowns or isolations, the global ocean freight network became a supply chain bottleneck in itself. A lack of labour to move freight, a lack of labour to move cargo on and off of ships, a lack of labour to transport cargo in and out of the ports and warehouses, and a lack of labour to produce vital equipment such as shipping containers caused a global crisis which didn’t avoid North America. Coupled with ships missing slots and a much lower schedule reliability, the US has seen record delays in ships awaiting berth and cargo dwell times in its ports.
Delays in deliveries and pick-ups due to on-going equipment shortages.
The port is running with 2-day delays although there is now good labour availability, however dwell times are seeing an increase with critical equipment shortages for road freight.
Los Angeles and Long Beach
On the West Coast in particular the equipment and labour shortages have caused serious problems, seeing record numbers of over 70 ships at anchor or awaiting berth in September, impacting supply chains, beyond those directly using the ports, with effects still ongoing.
Emergency dwelling surcharges have been implemented at these ports with the aim of cutting the dwell time of containers dramatically.
The surcharge will be charged by the terminals to ocean carriers, who in turn will pass this on to supply chain costs similar to port storage or demurrage.
The fees will differ based on whether the container is moved by truck or rail:
- Containers moved by truck - charges will be incurred if dwelled for 9 days or more at the port/terminal - Average current dwell time 6.7 days
- Containers moved by rail - charges will be incurred if dwelled for more than 6 days at port/terminal - Average current dwell time 13 days
The surcharge rates for container dwelling are charged in increments of $100 a day until moved out of the terminal ($100 for day 1, $200 for day 2, $300 for day 3 etc).
Only yesterday, it was suggested by some carriers that they will look to absorb the surcharge for rail freight only.
Despite the surcharge, the number of ships either at anchor or drifting off the West Coast remains at a high. Vessel operators are now being instructed to ensure vessels remain 150 miles off shore until a berth is available, with safety concerns over anchorage areas around the Los Angeles and Long Beach area due to inclement winter weather conditions.
The average wait for a berth across the LAX/LGB terminals is at 13 days, with a high of 23 days for some vessels in October.
Clearing the backlog remains a key priority and different approaches have been taken to try to reduce volume. The 24/7 pilot scheme recently reported on was one, which Hapag-Lloyd reported was unsuccessful and ceased at the Port of Long Beach.
Miami, Port Everglades and Jacksonville
Miami and Port Everglades are seeing minor ocean freight delays due to congestion and equipment shortages although rail delays at Chicago are affecting Miami and Jacksonville terminals, seeing delays between one and two weeks.
New York and New Jersey
Equipment issues in the form of chassis shortages, inclusive of rail ramps, are being seen across the terminals due to increased import volumes. This has been an ongoing issue since earlier this year, reported on in depth in our August advisory.
Delays in rail deliveries and pick-ups due to on-going equipment shortages with vessel delays of up to 2 days.
Savannah finds itself in a much better position with the turnaround of cargo, although ships are seeing delays of 8-9 days awaiting berthing with 95% of the port being utilised. However, long term projects to improve and expand the port are causing minor disruption intermittently.
Heavy volumes of vessels using the port have led to an 85% utilisation of the terminal, seeing 16 ships awaiting berth as of 29th October, an increase on previous weeks. To avoid a situation similar to Los Angeles and Long Beach, Seattle’s Husky Terminal has introduced an emergency dwelling fee of $315 per container for imports at dwell over 15 days. However, the terminal has also introduced Saturday gate openings to try to overcome the backlog before it intensifies.
A low volume of chassis are available at the port, with none available from Terminal 5 for pick up, which could see delays as some Terminal 18 loads are moved to Terminal 5 to avoid vessel congestion.