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California ports logjam eases after holiday import rush

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A traffic jam of container ships has dissipated outside the ports of Los Angeles and Long Beach, enabling US imports to flow freely again through a critical gateway.

The ports in California became so congested last year that the Biden administration intervened to unclog them. In January, a record 109 ships queued outside the harbour waiting for a chance to be unloaded.

Last week only seven ships were waiting for a berth, Gene Seroka, executive director of the Port of Los Angeles, told the Financial Times in an interview.

The backlog declined after retailers rushed to stock warehouses months before the winter holiday shopping season. A report by the National Retail Federation and Hackett Associates last week showed that US retailers’ imports exceeded 2021 levels every month from January to June this year.

Since then, their imports have trailed last year’s pace. Los Angeles and Long Beach — the entry point for about 40 per cent of goods imported to the US — experienced their peak holiday traffic in June and July.

“Many retailers brought their seasonal holiday goods [into the country] much earlier than normal,” Seroka said. “They wanted to get ahead of the curve and not get caught up in any last-minute slowdowns in the transportation network.

“We were able to bring [the queue] down to single digits in August while breaking records on cargo volume.” But volume has fallen off since then.

Despite improvements to wait times at the ports of Long Beach and Los Angeles, the US supply chain still faces challenges. Covid-19 lockdowns in China have interrupted the flow of imports, and there is still a shortage of critical semiconductors used in automobiles. US consumers continue to shop in the face of high inflation, but there are mismatches between what shoppers want and what is available.

“Our warehouses in southern California are still filled to the gills, but it may not be the exact products that the American consumer wants today,” Seroka said.

Besides seeking to avoid a repeat of last year’s congestion problems at the ports, retailers were concerned about potential slowdowns amid protracted labour negotiations at Pacific coast ports.

The union representing the longshore and warehouse workers at the west coast ports has been engaged in talks with the Pacific Maritime Association, while railroads have also held discussions with unions representing their workers.

Now, with less than two weeks before the traditional start of the US holiday shopping season, ports in other parts of the country are facing congestion. Retailers decided to bypass the west coast ports and have goods shipped to Houston, Savannah, New York and New Jersey instead, leading to backups at some of those locations, officials say.

This has led to lines of ships waiting outside the Gulf of Mexico and east coast ports to be unloaded. Houston set cargo records this summer, with container volume up more than 25 per cent in September from the previous year. Officials at the port in Texas, the largest on the Gulf coast, have recently introduced fees on containers that sit there too long in an effort to ease congestion.

Savannah, in the state of Georgia, has been congested since last year. This past August was its busiest month ever, with October the second busiest, the port said. A total of 28 ships still wait to be unloaded, down from 40 in August, officials said.

According to the most recent data from PIERS/IHS Markit, the east coast increased its share of the container trade from 47 per cent in July 2021 to 48.4 per cent in July 2022.

“There’s not a day goes by that there isn’t some real problem with the supply chain,” Seroka said, noting difficulties receiving goods from some Chinese manufacturers and labour shortages in the US. “Every day we’ve got something . . . we’ve still got a supply chain in need of workers in different segments, whether it’s truck drivers or warehouse workers.”

Some experts say the pressure on US ports could begin to ease as the record-breaking pace of imports that began during the depths of the pandemic slows.

The easing demand is lowering the cost of shipping, with prices for freight between Asian and US west coast ports down 80 per cent year on year, according to data provider Freightos, while still 81 per cent above November 2019. Prices for cargo from Asia to the east coast are down 64 per cent over 2021 but more than double 2019’s level.

Rail congestion has improved, while members of seven rail unions have agreed new terms on wages and working conditions with the largest freight rail companies. Two unions have yet to approve such a deal but have extended a cooling-off period from November 19 to December 4, delaying any potential strike.

Ben Hackett, founder of Hackett Associates, said last week he expects a “flattening of demand” that will continue into the first half of next year.

“This will depress the volume of imports, which has already declined in recent months,” said Hackett, whose firm publishes the Global Port Tracker with the NRF.

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