Port of Los Angeles to Operate 24/7 to Help Ease Supply Chain Bottlenecks

The White House announced that it has helped broker an agreement for the Port of Los Angeles to become a 24-hour, seven-days-a-week operation, part of an effort to relieve supply chain bottlenecks and move stranded container ships that are driving prices higher for U.S. consumers. The supply chain problem is tightly linked with the broader challenge of inflation confronting President Joe Biden.

Ports in Los Angeles and Long Beach, California, account for 40% of all shipping containers entering the U.S. As of October 11, there were 62 ships berthed at the two ports and 81 waiting to dock and unload, according to the Marine Exchange of Southern California.

Commitments by the Los Angeles port’s operator, longshoremen and several of the country’s largest retail and shipping companies are expected to help relieve the backlog. Walmart, FedEx and UPS made commitments to unload during off-peak hours, making it easier for the LA port to operate nonstop and reduce the backlog. The Long Beach port has been operating 24 hours daily for seven days for roughly the past three weeks.

Republican lawmakers have frequently blasted Biden’s $1.9 trillion coronavirus relief package for fueling higher prices. A recent analysis issued by the investment bank Goldman Sachs estimates that “supply-constrained goods” account for 80% of this year’s inflation overshoot, yet the political criticism continues to sting as housing and oil prices add to inflationary pressures.

“The Democrats’ inflation is so bad that even though the average American worker has gotten a multiple-percentage-point pay raise over the last year, their actual purchasing power has been cut,” Senate Republican Leader Mitch McConnell said. “Even dollar stores are having to raise their prices. Just ask any American family about their last few trips to the supermarket, the gas station or the toy store. Heaven forbid if they’ve had to participate in the housing market or the auto market anytime lately.”

The Biden administration has argued that higher inflation is temporary. Yet the supply chain issues have persisted months after the economy began to reopen and recover after vaccines lessened many of the risks from the pandemic.

Economists expect that the upcoming consumer prices report will show that prices climbed 5.3% from a year ago, significantly above the Federal Reserve’s 2% target. Atlanta Fed president Raphael Bostic said in speech that he no longer calls inflation “transitory: as he expects this current “episode” of inflation could last into 2022 or longer.

Source: Global News


‘Containergeddon’: Supply Chain Crisis Drives Walmart and Rivals to Charter Their Own Ships

Retail giant Walmart is chartering its own vessels in an effort to beat the global supply chain disruptions that threaten to torpedo the retail industry’s make-or-break holiday season. The aim is to bypass log-jammed ports and secure scarce ship space at a time when COVID-19, as well as U.S.-China trade ructions, equipment shortages and extreme weather, have exposed the fragility of the globe-spanning supply lines we use for everything from food and fashion to drinks and diapers.

More than 60 container ships carrying clothing, furniture and electronics worth billions of dollars are stuck outside Los Angeles and Long Beach terminals, waiting to unload, according to the Marine Exchange of Southern California. Prepandemic, it was unusual for more than one ship to be in the waiting lane at the No. 1 U.S. port complex, which handles more than half of all American imports. Other big retail players, such as Target, Home Depot, Costco and Dollar Tree, have said they are chartering ships to deal with the pandemic-driven slowdown of sea networks that handle 90% of the world’s trade. Or, as Steve Ferreira of shipping consultancy Ocean Audit describes the escalating concern: “Containergeddon.”

U.S. retailers’ traditional lifeline from Asia is freezing up owing to a resurgence of COVID-19 in countries such as Vietnam and Indonesia plus a power-supply crunch in China. The supply snarls coincide with booming demand as consumers spend more on goods than going out, and the festive shopping frenzy nears.

Burt Flickinger, managing director at retail consultancy Strategic Resource Group, said at least 20%-25% of the goods stuck on ships were unlikely to make it onto shelves in time for the Nov. 26 Black Friday kickoff for the holiday shopping season, a period when retailers make more than a third of their profits.

The biggest chains are taking matters into their own hands. In a typical year, Walmart would have moved toys from China to Los Angeles in hundreds of 12-metre cargo boxes on gigantic container vessels that serve multiple customers. But 2021 is far from typical. Incoming cargo at the Port of Los Angeles is up 30% from last year’s record levels. Trucks and trains can’t remove it fast enough, leading to logjams, said the port’s executive director Gene Seroka, reflecting the surge in consumer demand.

Chartered ships that offer valuable cargo space and can sidestep the container terminals play a critical role in this second pandemic holiday season, particularly for time-sensitive goods.

The Flying Buttress, for example, entered Los Angeles waters on Aug. 21. It got stuck in a queue outside the port before it bypassed clogged terminals and unloaded its goods at a separately operated bulk cargo dock nearby on Aug. 31, according to Refinitiv data and shipping records. During that voyage, Walmart circumvented the shortage of 12-metre containers typically used for global shipping by switching to bigger 16-metre containers that are almost exclusively used to move goods by truck and train within the United States.

Yet there is a limit to such workarounds. Home Depot sent its charter ship to nearly 200 kilometres south to the Port of San Diego. However, that terminal does not have a gantry crane needed to pluck boxes from massive ships and can only accommodate a maximum of 500 containers from one to two ships a month between now and the end of the year, said Greg Borossay, the port’s maritime business development principal.

The global supply crunch is providing lucrative opportunities for bulk cargo-ship operators, though; they are cashing in on a record spike in container shipping rates that has sent freight costs above US$20,000 a box on the biggest liner vessels. Global container shipping players such as AP Moller Maersk and Hapag Lloyd, are flush with cash from the soaring rates. Major lines are “putting in every ship we can find,” Hapag Lloyd CEO Rolf Habben Jansen said. Several shipping sources said other firms were snapping up second-hand container vessels of all sizes.

Dry bulk transporters have a short window of time to prepare decks to safely secure and carry cargo boxes. They typically transport commodities in below-deck cargo holds.

Genco Shipping & Trading is seeking approval from its ship safety certifier to prepare some of its own dry bulk vessels to carry containers. Genco isn’t going all-in on container shipping, said CEO John Wobensmith, who called the project “opportunistic.” Separately, agribusiness giant Cargill said it is looking into using some of the dry bulk ships it charters to instead hold containers, if only as a temporary solution, to “alleviate bottlenecks.”

Source: Globe and Mail