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What's the State of Domestic Port Activity Going Into 2022?

January 19, 2022

All around the world, many people have been waiting for the end of 2021 with eager anticipation. What will 2022 hold? Individuals and families look at lifestyle changes, businesses check in on their five-year plans, hoping that the New Year brings the right things their way. 

While they may not know it yet, much of the country’s expectations in the new year hinge on the condition of the freight and shipping industry. Families wait for the last pieces to move into a new home build, and companies stand by for newly manufactured products that could begin or revive a business. The pulse of American ports can measure the probability of these fulfilled expectations. 

Experts Expect the Supply Chain Crisis to Get Worse

Truck driver shortages have been a trending topic not only on America’s newsstands but in the United Kingdom and Germany, too. Available candidates meet worldwide labor shortages with diverse responses ranging from fear of illness to an apathy spurred by unfortunate global events. The grim reality is that due to Covid-19, there are over 4 million fewer people in the world to bolster the working class.

Rising costs of operating are also to blame for the gloomy outlook. As inflation continues onward, many companies struggle with the associated need for wage increases. With higher costs and fewer transporters, the cost of transport is also increasing for items as small as a ream of paper up to a cargo shipping container full of furniture imports. The supply chain crisis goes so far as to make it difficult for not just completed goods to arrive at their intended destination but also raw material. 

As the country nears the second anniversary of “unprecedented times,'' many advances medically and socially have called for celebration. Supply and demand have skyrocketed as lockdowns end and the world returns to normal (with a couple of extra jabs, of course). Yet the supply chain responsible for accommodating these demands is still in the ICU. CNBC affirms this outlook with Moody Analytics’ Tim Uy’s perspective: “Border controls and mobility restrictions, unavailability of a global vaccine pass, and pent-up demand from being stuck at home have combined for a perfect storm where global production will be hampered because deliveries are not made in time.” 

West Coast Port Congestion Slightly Improved, But Problems Remain

The two largest ports in the United States reside on the West Coast. The Port of Los Angeles made headlines for its declining productivity during the fall months. While December revealed some improvements such as cutting rail time, Gene Seroka, the Port of Los Angeles executive director, shared with Bloomberg, “the scramble to clear the logjam of imports through the largest U.S. gateway for goods trade resembles the game of Whac-a-Mole.” In Whac-a-Mole, contestants use a hammer to smack down a mole that pops up, just to have three more moles appear in its stead. In other words, port congestion is one step forward, two steps back. 

Empty Containers

The odds against the port have been stacked high. Almost as high as the 115,000 empty containers waiting at the port to return to their point of origin. Port regulations and restrictions have made returning empty containers difficult and have resulted in a chassis shortage near the docks. Bloomberg reports, “Trucks need a chassis to collect import-laden containers, but unless they bring an empty container to free up the chassis, they’re unable to move the import.” With a street dwell time of 10 days, the chassis available cannot turn around fast enough to alieve the port pressure. 

Can Ports Actually Dock Around the Clock?

While the Port of Los Angeles has previously claimed to get the port working around the clock, it has been unable to do so. Gridlocked by the inability to have 24/7 gate access to the harbor, extra efforts have been limited to the rail side. Ocean freight tracking would reveal what Bloomberg has already discovered: “The average wait at anchor was 20.7 days, staying near a peak of 20.9 set in early December.” With a wait time of nearly three weeks, ocean shipping without strategy becomes less efficient and more costly. 

East Coast Ports Are Still Operating at Record or Near-Record Levels

Meanwhile, ports are doing their best to maintain efficiency on the Atlantic coast. As importers have seen the lack of visibility into containers increase costs and delays, some have opted to utilize the smaller ports on the East Coast. Doing this has pushed the East Coast port authorities to think creatively to minimize the supply chain bottleneck on their end. 

From West to East

Just as this phrase is opposite of the normal flow, many importers are expanding past the Asia-to-West Coast ocean shipping norm. As freight gets “lost” waiting at West Coast ports, cargo is being diverted to other ports looking for visibility solutions for intermodal transportation. Despite some East Coast ports being further from their final stateside destination, ocean freight tracking reveals that shippers can save time by skipping the waiting time at a port like Los Angeles and getting freight on the road sooner.

Pop Up Ports

The Port of Savannah has developed one innovative temporary solution: Pop Up Ports. The pop-up business model has been used frequently in a post-pandemic market for small business owners who choose to minimize the daily overhead of a stall or building rental. The Port of Savannah has taken this concept and developed four pop-up ports out of idle rail yards. This method frees the dock from an overabundance of ocean containers by quickly moving them closer to their final destinations. Transportation Secretary Pete Buttigieg shared with CBS News, "It's that kind of problem-solving that I think is going to help us deal with these short-term issues, even while we're making big investments for the long run." 

Federal Grants to Add Capacity

In the meantime, other East Coast ports have been working with the federal government to receive grants to expand docks for porting larger vessels. The Port of Brunswick received a $14.6M grant that was “One of 25 projects in 19 states receiving awards of more than $241 million through the Maritime Administration’s Port Infrastructure Development Program,” according to the Atlantic Journal-Constitution. While the Port of Brunswick does not currently receive the common cargo shipping container, this grant will expedite the arrival of vehicles that are imported or otherwise shipped overseas. Shippers who track intermodal shipping in real time provide relief for their international customers and auto marts as less time spent at sea means more time on the road. 

Floridian Port Expansion Will Help Too

Meanwhile, Florida is also proving itself as a worthy option for ocean shipping In the Southeast. Florida not only hosts a whopping 15 ports on its sunny peninsula, but its proximity to the Panama Canal makes it the first port of call for those traveling through that busy transportation artery. In addition, the state’s geographical location and shape put it on the path of two major trade lines: The Atlantic Ocean and the Gulf of Mexico. 

As Florida has watched the increasing density of waiting for freight on the West Coast, the state government has been working extra hard to approve a 2022 budget of nearly $117.3 million toward doubling the capacity of the state’s ports. That healthy budget would impact all 15 ports located in the Sunshine State, including the bustling JAX Port and busy Port Everglades. Many of the state’s ports are known for their cruise ship destinations, giving them a headstart on getting ready for large barges. 

Miami, also known as “The Cruise Capital of the World,'' has been consistently turning an increasing profit from cargo growth over the past five years. According to Container News, this ability to do both cruise ships and cargo resulted in Miami placing as the 10th busiest container port in 2020. Yet somehow, the three busiest ports already mentioned experienced freight decline in 2020, while Port Manatee, Port Panama City, and Port Tampa Bay saw cargo shipping container increases. If the statewide port upgrade and improvement budget is improved, it will be interesting to see which ports get the most financial attention. Regardless, routing through Florida is a strong contender for ocean freight management in today’s market.

Above-Average Imports Are Also Driving Warehouse Vacancy Rates Lower in California

There has been a dwindling amount of warehouse vacancies in conjunction with the ocean container bottleneck at Southern California ports. The area between Port of Los Angeles and Long Beach Port, commonly known as the Inland Empire, saw a record-shattering 0.7% warehouse vacancy rate in Q3, according to CBRE. Throughout all of Southern California, warehouses are full to the brim with a quick turnover between clients. 

This expanded warehouse usage is not just due to box cargo needing a temporary home. Digital freight forwarding companies are finding a market delivering to e-commerce-focused facilities. A focused e-commerce facility may receive some box cargo. Still, instead of packing it to the brim with containers, open space is needed in order to directly ship to customers and facilitate returns. 

As vacancy rates lower and asking lease rates rise, many companies consider other cities for temporary container storage. These cities stretch from Northern California all the way out to Salt Lake City and Phoenix. While the distance from port to warehouse may provide its own set of issues, the costs saved in rent are a large part of the solution. Supply Chain Dive’s chart of Q3 asking rents shared that the average square foot price of Salt Lake City’s warehouse and distribution settles at $6.86 instead of Inland Empire’s $11.54. 

Regardless of the location, these clogged warehouses are packed with orders. Although there is available land on the market in California to build buildings such as warehouses, the supply chain crunch comes full circle due to the lack of materials to make this happen quickly. Companies that have end-to-end visibility technology bring hope to prospective warehouse renters to know when more buildings can be finished. 

Higher Dwell Time Is Leading to Higher Freight Spend for Managing Imports/Exports

As pent-up demand makes its mark on the global freight market, the United States experiences a historical swell of dwell times. Dwell time is understood as the time truck drivers wait on-site to pick up or drop off loads. This increased dwell time is not specific to the teeming ports supporting the Inland Empire, but it is felt even on the East Coast ports of New York and Charleston. International logistics managers must consider this added dwell time in their ocean freight tracking decisions.

How Dwell Time Impacts Carriers

The increased dwell time average is a significant burden on carriers. Trucking companies still need to cover their drivers’ wages, gas, and overhead costs while those same drivers cannot make headway to their next destination. Supply Chain Dive notes that Los Angeles’ dwell time grew from a September average of 75 minutes to a November average of 90 minutes. 

In some situations, these numbers could double per driver if they have to wait to drop off freight and pick up freight separately. Based on these statistics, that could be three hours of work that could come out of a truck driver’s total fourteen hours they’re allowed on the road per day. This significant decrease in drive time creates a higher cost to carriers and thus higher costs to importers. 

The growing dwell time is due to increased demand and the equipment available at the port for freight transfer. While cranes make sense in flatbed situations, they also take more time than forklifts for most products. Integrated carriers tracking their freight can see the time differences and budget appropriately to charge importers a fair rate. 

How Dwell Time Impacts Shippers 

Every delay adds up when moving large amounts of product. Shippers are at a significant disadvantage when having to wait for freight longer. When shippers cannot provide for their customers in a timely fashion, customers have to deal with the ramifications of an out-of-stock sign. While not typically a crushing situation, out-of-stock alerts have always inconvenienced consumers. Even so, in a season marked by supply chain chokes and fluctuating item limits, consumers are willing to jump ship and move their orders to companies such as Amazon. The past two years revealed the collapse of many businesses due to the shortage of supplies, affecting the businesses’ consumers, the market, and their upline. If enough consumers take their business elsewhere, collapsing customers can take a significant chunk out of a shippers’ business. 

Dwell Time Improvements

Although it is clear that high dwell time rates negatively impact the supply chain, some improvements are noticeable. Bloomberg records that at the Port of Los Angeles, “Rail dwell time has dropped to two days from 13.5 days over the summer”, and that “Dwell time for containers moving by truck has been reduced to six days from 11,” although the latter is still in need of progress. Companies that are automating shipping container delivery status can contribute to tracking these numbers. As more accurate data is collected and released, companies can make better decisions about their freight moves. 

Higher Dwell Fees Are Likely to Come…Eventually

In October, the Port of Long Beach and Port of Los Angeles initiated the first of its kind: dwell fees. Importers incur these fees for letting import containers remain on marine docks. These fees would help compensate for how dwell time has financially burdened carriers and other aspects of the supply chain by focusing on improvements.  The two ports shared that ocean carriers could avoid these charges specific to containers moving by truck or rail as long as they are moved before nine days and three days, respectively. 

Logistic Management reports: “POLA and POLB previously said that ocean carriers with cargo in either of these categories would be charged $100 per container, which will increase in $100 increments per container per day. The ports said that the fees collected from this initiative will be reinvested for programs to enhance efficiency, accelerate cargo velocity, and also address congestion impacts throughout San Pedro Bay.” While using these fees would benefit the industry overall, the fees incentive BCOs (beneficial cargo owners) and shippers to have a transport plan. 

Integrated carriers tracking their cargo have an advantage in this push to solve the bottleneck in Southern California. Container tracking software reveals when and where freight lands, providing details and time to strategize effectively to get products moving. Without taking steps to improve container track and trace, BCOs and shippers often must guess which material to plan moves for and when. Not knowing where containers are can lead to fees that literally increase daily by three digits per container. Maintaining visibility is very important to prioritize in the face of looming dwell fees.

Fortunately for many ocean carriers, these two west coast ports have not begun charging these container fees. 

Since publicizing the need to establish fees at the end of October, the ports have analyzed the situation at the docks every one to two weeks for improvement. As of December 2021, Logistics Management reports that “The ports have seen a cumulative 46% decline in the amount of aging cargo on their docks.” This continual decrease has resulted in eight postponements of the container fee implementation.  

Stay Future-Ready With Ocean Container Visibility

With a new calendar year ahead, shippers need to consider how impactful ocean freight tracking can be for business. As ports go through massive improvements and regulate new systems, the possibility for lost freight is more likely than ever. Although upcoming changes to the domestic port system ideally will make the industry better in the long term and improve the supply and demand in the short term, it’s important to consider the time required to reform and smooth the process. 

In the meantime, shippers, importers, and BCOs can focus on their container visibility. Investing and partnering with technology that can track data with API and TMS integrations provides the opportunity for 24/7 container look-up. This type of true visibility is port to port and intermodal, meaning containers can be found on sea, land, rail, and truck. Book a demo with OpenTrack today to pursue a simple, smart, fast, and accurate way to track your shipping containers.

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