The Port of Los Angeles, the busiest port in North America
saw record volume in 2021. We have so much cargo coming across
the Pacific Ocean, unlike anything we've ever seen before.
US consumer demand has been elevated since the summer of
2020. Imports, including furniture, car parts and apparel
surged to a record of about 5.5 million TEU's in 2021, a 13%
increase from the previous high in 2018. But along with that
volume came with it an array of headwinds impacting everyone
from retail stores and large manufacturers to portside
communities. As of February 4 2022, there was a backlog of
over 90 container ships drifting, slow steaming or
waiting outside the Port of Los Angeles. At the same time, there
are almost 69,000 empty containers at the port's
terminal and off-dock depots. Throughout the last two years,
you've had economies opening and closing and ports doing the same
and factories and all the rest, workers getting sick, truckers
being out of work. And all of those little mismatches, along
with some kind of fundamental ones between different
countries, have thrown our supply chains out of balance.
From what I've been told from both logistics experts as well
as the importers, they tell me at least, at least until the
third quarter of 2022 we are going to see the supply chains
disruptions because of the immense congestion. Port
congestion also has health implications for the surrounding
community. The ports are a massive economic hub, there's no
denying it, there's no denying there global importance, but the
impacts on people's health, the impacts on people's quality of
life and the impacts and how long they live can also not be
denied. And it has worldwide implications too. As of November
2021, 11.5%, of global vessel capacity was in effect offline,
as ship's waited in queues. So what is causing the bottlenecks
at West Coast ports, and what steps are being taken to ease
the congestion?
The Port of Los Angeles saw record volume in 2021, as U.S.
consumers shifted from spending on services like entertainment
and travel to household goods and electronics. Container
volume at the port in 2021 reached 10.6 million TEU's
almost 16% higher than the previous year and almost 13%
more than the previous record set in 2018. A TEU or
twenty-foot equivalent unit is the industry standard to measure
cargo capacity for ships and terminals. One 20 foot container
can hold about 400 flat screen TV's. In the fiscal year ending
June 30 2021, imports surged to a record 5.7 million TEU's and
operating revenue at the port jumped as well up 22% from the
previous year to $572 million. But that crush of goods also
brought with it massive bottlenecks as ports struggled
to cope from a surge of imports coming from Asia. These supply
chains were designed for a kind of a delicate dance of sorts
with containers, moving from one country to the other and then
being brought inland and then being shipped back out. And when
those mismatches start well that whole system breaks down a bit.
And that's precisely what we've seen. One analysis showed the
transit time to ship goods from ports in Asia to when it is
ready to be picked up in North America has more than doubled
since the start of the pandemic. Soaking up of vessel capacity
has tightened the network of the rest of the world that any small
disruption becomes a massive problem. And that's why the rest
of the world, is so to speak, suffering from the challenges
that are happening in North America. The movement of
containers was also impacted. As of February 4, 2022, there were
more than 44,000 import containers sitting on the docks
at the Port of LA, including 66% of containers that have been
waiting four days or less, 14.6% that have been waiting between
five to eight days and almost 20% that have been waiting nine
days or more. Prior to the pandemic on average containers
for local delivery sat on the docks for just under four days,
while those heading to trains remained there for less than two
days. Surging Covid cases among port workers impacted the flow
of goods too. According to media reports in January 2022 about
800 dock workers, 10% of the workforce, at the ports of Los
Angeles and Long Beach were unavailable for work due to a
Covid-related reason. To help ease congestion in the fall of
2021, the Port of Los Angeles committed to 24/7 operations and
announced plans to charge ocean carriers a dwell-fee for idle
containers. Productivity on the docks is great but what we found
earlier this summer was some folks on the import side of the
ledger, were ordering just in case not just in time. In fact
back in
October, we levied a plan, of penalty, against long aging
containers on our docks. At that time, more than 40% of all
imports had not moved in nine days or more. Since the threat
of the penalty fee was announced the Port of Los Angeles and Long
Beach saw a combined decline of 62% in aging cargo on the docks,
the slowdown saw retailers take action of their own too. In an
effort to avoid bottlenecks, Home Depot, Walmart, Amazon and
others began chartering their own ships.
Stretching from Honolulu to New York, there are more than two
dozen U.S. ports that are equipped to handle containerized
cargo. In 2019, 59% of all cargo transported between the U.S. and
Asia came by via ship. That same year 42% of goods transported
between the U.S. and Europe went by boat. But while shipping is a
key component of U.S. trade, America has some of the least
efficient ports in the world, according to a recent World Bank
and IHS market study. In a review of 351 global container
ports, the Southern California ports of Los Angeles and Long
Beach, which handle 40% of U.S. container imports didn't break
in to the top 300. The Port of Los Angeles ranked 328 behind
Dar Es Salaam, Tanzania. The Port of Long Beach came in 333
behind Nemrut Bay, Turkey. Ports in Asia and the Middle East were
ranked on top. Asian ports, for example, are considered up to
50% more productive than their US counterparts due in part
Asian factories and terminals working 24 hours a day versus
U.S. dock workers who generally don't operate on the weekends.
Moving goods in off-peak hours has other benefits to like
reducing congestion along highways, railroads, and in
warehouses. We work traditionally about 19 hours a
day here at the port and with the surge we've been flexing,
opening a little early, crossing over lunchtimes, as well as for
the transition to the evening gates beginning at six o'clock.
We've also said that we would be open 24 hours a day, but we've
had very few takers. The warehouses traditionally worked
during the days. And for truckers, we've seen that 30% of
our appointments to pick up cargo continue to go unused
every day. Another problem according to analysts is the
lack of automation. A study by management consulting firm
McKinsey found that a successfully automated port
could see productivity rise by up to 35% and operating expenses
fall by over 50%. Compared to comparable ports in Europe, the
U.S. ports are generally speaking much less efficient.
And there's there's several explanations to it. Number one
is lack of automation. The unions on both coasts have been
quite vocal in opposing automation in their contracts
and using their really extreme leverage to ensure that their
future contracts don't have what they call job killing
provisions, allowing for additional automation. In 2021
the International Longshoreman's Association, a labor union
representing dock workers on the Atlantic and Gulf Coasts, warned
shipping lines and developers of automated vessels that members
would not work ships without crew aboard. It also negotiated
an agreement to prevent automation at ILA ports. Around
the world only about 5% of ports are automated today. Here in
Southern California there are two marine terminals on the Los
Angeles side and one on the Long Beach side that have some
assemblance of automation. There's work together to be done
between the Employers Association and the ILWU to make
sure that if this technology continues to progress, the
worker is not left behind. We have to make sure we can
upskill, reskill and make great middle class jobs here on the
waterfront, even in the advent of technological advancement.
But much of the congestion we're seeing originates far from the
docks, according to the Pacific Maritime Association, a
nonprofit group that secures labor for West Coast terminal
operators. The group said West Coast port congestion is largely
driven by the cumulative collapse of the entire logistics
supply chain, including a critical shortage of industrial
warehouse space in Los Angeles, as well as a dearth of shipping
containers, rail cars, trucks and chassis. A lack of truck
drivers is another problem. The industry is short by more than
80,000 drivers nationwide and the shortage could surpass
160,000 by 2030. Warehouse workers are also in short
supply. On the warehouse landscape were short 400,000
warehouse workers nationwide and about eight to 10,000 here in
Southern California. The challenges we're talking about,
maybe 20 years of lack of proper investment is now hitting us,
and it's hard to see how that can be reversed in a very short
span of time. And yet another issue hampering ports, according
to one analyst, is the 100-year-old Jones Act,
which requires goods transported on water between U.S. ports to
be shipped aboard vessels that are U.S. built and own and
crewed by U.S. citizens. That in effect, makes it cheaper to ship
goods via highways or rail than on water.
So a lot of countries have a system where you have a massive
container ship goes into a massive port, that's of course,
fully automated and open 24/7, and then these little feeder
ships, take the cargo and then go to the smaller ports all
around the country. But we don't have that. Instead, we have
these massive ships that show up at one port and to avoid the
Jones Act, they port hop down to the rest of the ports with less
and less of cargo because you can't pick up new cargo and
you're there all the way down. It's a crazy system but that's
the system we have.
For years California's portside communities have suffered
disproportionately from high rates of air pollution and
pollution related illnesses. And while levels of outdoor air
pollutants have fallen in the state over the last three
decades, Los Angeles County remains one of the most polluted
parts of the country. Port slowdowns have only exacerbated
the situation. Chris Chavez works at the nonprofit Coalition
for Clean Air and lives near the Port of Long Beach.
We have seen particularly when we were having the congestion at
the ports, the number of ships waiting outside where you had at
some point over 100 ships waiting to enter the ports of
Long Beach and Los Angeles huge increases in both smog forming
and cancer causing pollution.
Container vessels make up about half a port-related air
emissions. With a logjam of ships idling near the San Pedro
ports in October 2021 pollution increased roughly the equivalent
of the emissions from 5.8 million passenger cars. Trucks,
trains and terminal equipment are another source of pollution.
Ships are a very significant factor when it comes to air
pollution here. Another big factor again is the trucks.
Trucks are just by the sheer amount of trucks in this region.
Older trucks have less strict emission controls on them.
Freight Transportation is linked to higher rates of asthma,
cancer and other illnesses and is the largest contributor to
diesel particulate matter and nitrogen oxide emissions in
California. Global shipping in general is responsible for about
30% of worldwide NOx emissions, and has been linked to thousands
of premature deaths in coastal areas around the world.
But what we need to realize is that when we do order that can
have an effect on another community. If you're buying a
TV, if you're buying a good from the Midwest, there's a very good
chance that it's going to go past my neighbor, very good
chance it's going to go down the freeway that many, many other
trucks are carrying goods either to warehouses for national
distribution or beyond.
In an effort to reduce emissions. The ports of Los
Angeles in Long Beach in 2006 created a Clean Air Action Plan
to reduce the health risks posed by air pollution. The Port says
air pollution is down drastically since 2005. The port
has also provided financial incentives for ships with newer
engines and for ships that reduced speeds to 12 knots when
entering the San Pedro Bay Harbor. When ships slow down,
they burn less fuel resulting in fewer emissions. And with the
goal of eliminating emissions from all trucks calling at the
port by 2035, last summer, the port debuted five hydrogen
powered fuel cell electric vehicles along with two hydrogen
fueling stations. Currently, the port is testing 107
zero-emission units in the areas of cargo handling and harbor
craft. And financial investments could help port to the Biden
administration's infrastructure package sets aside $17 billion
to fix the nation's ports. And California Governor Gavin
Newsom's 2022-2023 state budget proposal allocates $2.3 billion
for its ports. But despite those measures, analysts say we're
unlikely to see relief in our supply chain anytime soon.
There's nothing that indicated that this is going the right
way. It hasn't gotten much worse in the last couple of months,
but it is still horrendously poor. At the moment less than
10% of all vessels that arrived in the North American West Coast
ports are on time, more than 90% of vessels are more than one day
late. And that's compared to normally would see 70 to 80%
being on time.