Smaller U.S. West Coast ports, including the Ports of Oakland, Seattle and Tacoma are experiencing ocean carrier service cutbacks that are adversely impacting U.S. agricultural exporters, according to Paul Snell, president of Huntington Beach, CA-based British-American Shipping.
The export situation is likely to remain challenging for the remainder of 2022, Snell said.
Snell was speaking to the Propeller Club of Northern California on April 19th.
In February, the U.S. Department of Agriculture announced that final 2021 trade data showed that exports of U.S. farm and food products totaled $177 billion, topping the 2020 total by 18 percent.
However, in 2021, California agricultural exporters lost $2.1 billion partly due to California port operations and high import freight rates, according to a University of California at Davis and University of Connecticut report.
The report explained: “We found that containerized agricultural exports from California ports were $2.1 billion (or 17%) below their counterfactual level due to port congestion between May and September 2021. California farmers bore the brunt of these losses, with tree nuts, wine, rice, and dairy products suffering significant economic damages. The annualized economic impact is by far larger than that of the 2018 U.S.-China trade war, which caused economic losses of about $500 million to California agriculture.”
The report said that 97,000 fewer export containers shipped in 2021 contributing to the $2.1 billion loss: “California ports handled about 97,000 fewer container exports (measured in TEUs) loaded with agricultural products compared to the counterfactual scenario. This amounts to $2.1 billion in lost foreign sales.”
The report entitled “Containergeddon” and California Agriculture partly blames inefficiencies at California ports for the losses: “The lost farm exports mirror the fact that California ports are among the least efficient in the world. As a result, some importers now view California as an unreliable supplier of agricultural products due to inferior port infrastructure.”
Supply Chain Challenges
Snell explained that the situation is more complicated. He said with “vessels awaiting berth at LA/LB Ports” this “has resulted in Oakland experiencing cutbacks in vessel and service calls as “carriers want quicker container turnarounds, resulting in emphasis on empties being returned to Asia.”
The result is “port omissions and blank sailings” as “carriers are no longer accepting special free time requests” and the result is some “ports on the West Coast … are being under-utilized or omitted completely including Oakland, Seattle (Tacoma) and Vancouver.”
During the pandemic, an online shopping boom changed the landscape of the global supply chain where E-commerce in the U.S. increased by 39% causing import rates to rise and making exports less attractive.
Challenges exporters are facing include:
- Equipment/chassis shortages.
- Trucker shortages.
- Increased fuel costs.
- Terminals becoming increasingly difficult to work with due to short receiving windows.
Terminals
Snell says inefficient terminals in the United States complicate the Port of Oakland’s competitiveness:
- The Port of Oakland was “rated 332 out 351 for efficiency” citing a Reuters report of Oct 20th 2021.
- Lack “of on-dock rail at Oakland slows down the flow of IPI (Interior Point Intermodal) containers.”
- Velocity of container moves at North American ports and terminals is very low in comparison to Europe and Asia where terminal operations are much more efficient.
- Due to the “terminal appointment system, truckers must now hire new personnel to process the appointments … (extra overhead and handling)."
- Challenges for exporters with truckers include the following: Truckers favor imports over exports.
- Appointment systems “at the terminals are overly cumbersome for truck drivers.”
- Drivers “shouldn’t have to book two appointments for the same container.”
- There is a “lack of appointments.”
- There are “constant vessel sailing changes.”
- The strains in the system have caused a rise in containers that are not “seaworthy equipment.”
- There is a shortage of chassis.
- Rise in fuel prices has contributed to the cost of trucking a container between Northern and Southern California going from $1,500 to $3,500.
- Truckers “resistance to move between Northern and Southern California” is related to longer driving distances, maintenance and repair.
- Shortages of chassis and gensets adversely impacting exporters shipping refrigerated containers. This is especially a problem when trucking between Northern and Southern California.
To make matter worse, Snell told AJOT, the City of Oakland proposal to build at baseball stadium at the Port of Oakland’s Howard Terminal will further complicate trucking operations at the Port.
Assessing the impact of the proposed Howard Terminal ballpark, TruckersReport.com argues: “Despite supply chain bottlenecks, soaring inflation, and policies that discourage owner-operators in California, the City of Oakland plans to take a giant step backward and hand over its Howard Terminal for a shiny new baseball stadium. In response, a coalition of shipping-industry groups, port managers, trucking operators, and the dockworkers’ union banded together to bring a civil lawsuit intended to stop the Oakland Athletics baseball team from displacing workers.”
Exporter difficulties with carriers include:
- The carriers “don’t set appointments and the receiving windows keep changing.”
- Carriers “have lost control of intake.”
- Despite higher freight rates for exports, they do not compare with the even higher freight rates for imports. So, this offers scant motivation for carriers to focus on the U.S. export market.
- Rising import rates increase “Oakland omissions with focus on (the) import market into Los Angeles and Long Beach.”
- The timeline window for container “delivery is too short.”
- Carriers are now looking further outside of Oakland to begin rail service via U.S. East Coast rail shipments “to European and Med markets.”
- A lack of equipment hurts exporters.
- Growing differences in market strategies may bring current ocean carrier alliances into question.
Solutions
Possible solutions for attracting business to the Port of Oakland are:
- Demand for increased “Oakland port calls must also come from importers.”
- A focus “on import rates and efficiencies will make exports more appealing for carriers.”
- Develop staging areas for export containers near the Port: “a better idea would be to stage exports in focused areas” and allow “larger receiving windows.”
- Reduce containers on dock and improve flow of containers.
- More efficient trucking power would cut “out wasted cost and journey time between empty return and empty pick up.”
- Enhance focus and support “on U.S. export market, enhancing profits for carriers in both directions.”
- Relieve rail congestion at California ports.
- Require more carrier “transparency on container tracking and utilization.”
Port of Oakland Response
In response to Snell’s comments, Ron Brown, manager business development and marketing, Port of Oakland said the Port was working to attract carriers back to the Port.
Brown said that the Port of Oakland could nearly double its current annual container handling capacity to 4 million TEUS and become the export Port of the United States but the Port needs new investment. This investment includes the larger turning basin to support expansion at the Oakland International Container Terminal, improved rail handling capacity and the support of carriers to do so:
“If there is a large percentage of IPI (i.e., rail) cargo, that cargo gets loaded on the terminal and then it blocks space for the exporters. So, the terminal doesn’t have enough space to receive all of the export cargo. There’s a large percentage of empties, and those empties are sitting on the terminal. We’re having that conversation with the terminals and the carriers … to get us into balance.”
Brown concluded by saying:
“There are a lot of issues. There is no one solution. We are trying to address them all and we’re getting there. We are working on it so that we are making it as easy as possible for our exporters to use our Port. …For years I’ve been saying … Oakland is the agricultural port for the Western United States. And essentially, we want to be the agricultural port for the United States. We have to make sure that these services flow through smoothly.”
