Container incentive drives shippers to a better and faster equipment usage
For months, ships loaded with cargo have gathered off the coast of Long Beach waiting their turn to be processed at the city’s port, and the backup could be due to a perfect storm of increased online shopping bringing an unprecedented level of cargo combined with a shortage of shipping containers and rail chassis, according to a port official.
The situation has led to a backlog at the Port of Long Beach that hit a peak of about 40 ships earlier in the year. However, in recent weeks that number has been hovering around two dozen.
Port of Long Beach Executive Director Mario Cordero explained that the container shortage has been driven by a profit incentive for shippers who get paid about $5,000 for every loaded container they deliver to Long Beach. A year ago the price paid to shippers was roughly half that, Cordero said.
Historical 123% increased cargo flow in Long Beach port
“Supply and demand is what it comes down to,” Cordero said. With more people shopping online than ever it has created a historic flow of cargo through the port complex as shippers from across the Pacific work to meet the demands of of American consumers.
This has resulted in a push to get empty containers back onto ships headed for Asia as possible. The port has seen a roughly 123% increase in outbound empty containers in March 2021 compared to last March. The Long Beach port processed more containers in 2020 than it had in any previous year with over 8.1 million containers being processed.
But in recent months a larger issue has been the lack of rail equipment, Cordero said. The shortage of rail cars has impacted the ports ability to move cargo after it’s unloaded from ships and a few weeks ago there were so many full containers that some terminals were at storage capacity.
Rail freight operators putting maximum efforts to keep supply chain moving
The two largest rail freight transporters at the port complex are BNSF and Union Pacific. In an email a representative from Union Pacific said that the company is not experiencing a shortage but that near-term demand has “continued to exceed available railcar capacity.”
“We have recently put more railcars into active service to continue to support our customers and the import demand,” the statement said. “Union Pacific is in direct communication with Long Beach Port authorities and are doing our part to keep the supply chain moving.”
A BNSF representative said that its working with the ports to handle the record volumes of cargo as efficiently as possible but acknowledged that available chassis has been an issue affecting the speed at which railcars can be unloaded and returned to the port. However, the operating hours of the port could be a factor in how its equipment is deployed, the statement said.
“It is important to remember that our rail operations are 24/7 and we are also impacted when certain parts of the supply chain aren’t,” the statement from BNSF said, adding that its westbound operations are affected by some terminals not being open 24 hours. “We need all parts of the supply chain to be willing to operate 24 hours a day, 7 days a week to help keep up with these unprecedented demand levels.”
Port terminals missing link is to apply a 24-hour/7days model
Cordero said that some of the issues have been addressed by the rail operators but the problem is no completely resolved, adding that a complex this large should have enough equipment to use in a “crisis situation.” The Ports of Long Beach and Los Angeles is the second busiest port in the country and moved 17 million containers last year.
Cordero said the port might have to start looking at a transition to being a 24-hour port. Currently gates operate from about 8 a.m. to 5 p.m. with the capacity for some to work into the early morning hours, but that generally doesn’t happen.
“When you stop and think about it, when the vessels arrive and they’re unloaded they’re 24/7, when the container moves to the inland by rail it’s 24/7, the missing link is in the middle,” Cordero said.
Cordero said that he hopes stakeholders at the port begin having the necessary conversations to hopefully move toward a 24-hour model and how to address the costs of doing so, which he said will be a legitimate factor.
“But then we have to ask the question of what’s the cost of not doing this?” Cordero said.
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