U.S exporters will face daunting challenges this fall exporting their agricultural products from U.S. West Coast ports: ocean carriers have reduced services from Seattle/Tacoma, Oakland and Vancouver as well as to Southern Asia, Middle East, Mediterranean and South American destinations.
This is the result of ocean carriers focusing on high import freight rates between Asia and the United States, primarily at the Ports of Los Angeles and Long Beach, according to import/export specialist Paul Snell, CEO of British American Shipping, based in Huntington Beach, California.
“I would comment that although services from U.S.A. to China are still available the carriers have greatly reduced feeder connections from China ports to Southeast Asia, Dubai, India and Jeddah. This has greatly reduced space capacity into Southeast Asia, Middle East and India. The focus on increasing tonnage between Asia and U.S.A./Europe has impacted capacity to Central, Latin America, Australia, Africa & Mediterranean.
Snell had issued an earlier warning about problems for exporters shipping out of West Coast ports during a Propeller Club of Northern California forum last May. At that time, Snell warned that the export season beginning in October will be difficult.
He has urged that the United States impose a premium on empty containers returning from U.S. ports to foreign destinations so as to create an incentive for ocean carriers to carry more loaded export containers rather than returning with empty containers to more quickly return with imports:
“I urge the United States to better support its U.S. Export program. There is no regulation or financial penalty to prevent carriers ignoring U.S. exports. The carriers need to be encouraged to have a vested interest in the U.S.A. Export program and the solution would be for terminal operators or U.S. government to impose a financial penalty on re-loading empties back to China. If it wasn’t financially viable to load an empty container the carrier would have to load a full container and provide US exports with fair and normal weekly services to all market areas. There is also an environmental cost with re-loading empty containers and there is no benefit to the U.S.A. to allow this to continue.”
High Freight Rates
In an interview with AJOT, Snell said spot rates for imports from Asia to the West Coast have risen to $15,000 per container from a price of under $2,000 in 2019:
“With spot rates from China now over $15,000 container back to the U.S.A., the imbalance of freight prices is leading carrier motivation to be unfairly centered on Asia Export trade lanes to U.S.A. & Europe.
Volumes from China have soared since the pandemic began.
The growth of imports has placed serious restrictions on vessel and terminal space, U.S.A. container and chassis equipment, and the rail and truck infrastructure is not sufficient to handle the growth in import volume.
Also, as imports are delivered ahead of exports, the infrastructure shortfall is having a greater impact on the U.S.A. exporter.
The U.S. exporter is having to work around limited equipment, reduced loading times (sometimes as short as 24 hours) after waiting 2 or 3 weeks for a vessel connection, rail and truck delays and limited ocean service networks.
Many U.S.A. companies don’t have the experience or skill set with personnel to cope with the daily challenges faced with exporting U.S.A. products overseas.
It is a very desperate situation and it is getting worse.”
How U.S. Commodity Exporters Are Coping
One U.S. export analyst said U.S. agricultural exporters have been creative in their approach: “Different commodity groups are experiencing different type of challenges… Everyday I’m hearing new ways that our exporters are being creative to serve their customers. “
The analyst cited these developments:
- The proteins (beef, pork, poultry), fresh vegetables, seafood, and citrus “are experiencing challenges with reefer container availability and long wait times at destination ports.”
- Rice “is experiencing a lack of feeder vessels to move product into Southeast Asia and the Middle East.”
- Wine “is experiencing challenges getting enough available bookings/slots to move wine to/from Europe.”
Carriers Cutback Service To Oakland In August
The problem facing the Port of Oakland, Snell says is: “The ships are so full that it’s taking days upon days to unload the boxes … It’s not Covid anymore, it’s sheer volumes. And so, in August, Oakland was temporarily dropped as an import designated port because there simply were not enough boxes to drop there. Oakland is the port where you loaded up export containers and is our most important agricultural export port.”
And because the import surge was concentrated on Los Angeles and Long Beach, “Oakland was sacrificed.… We don’t know if they are coming back in the month of September, but we do know that if they do, we will have an equipment deficit problem because we haven’t delivered enough boxes into the Oakland area and if we don’t have enough going in, then we won’t have enough boxes to move exports out.”
Exporters who normally ship out of Oakland have looked at alternatives:
“Exporters have sought to find a way to transport exports usually shipped from Oakland through either Los Angeles and Long Beach in Southern California or by rail.
Trucking problems block access to the Southern California ports and rail service shortages block transporting containers to the East:
“There are people looking to truck from Oakland to LA but that isn’t going to work because the price is at least $2,000 per container … and the carriers don’t want you changing chassis between the two ports which is actually a good thing because we would run out of chassis in Oakland in five minutes. So you’ve got to take that chassis back to Oakland. So how any truckers are going to want to do that? And then, there’s a trucking shortage moving all of these containers coming in from Asia So, it’s not really an option.”
And the problem by rail is: “A lot of requests to move cargo by rail to Houston or the East Coast, but the railroads are not accepting cargo so you can’t do that.”
The reason is: “We also have Union Pacific and the Burlington Northern Santa Fe (BNSF) rail problems. We have congestion at three rail heads in the USA: one in Chicago, one in Columbus Ohio and one in Los Angeles. This is due to imports being extremely strong needing to go inland and the rail can’t cope with the demands. So basically, they decided ‘let’s clear the demand first’ and close the rail to any new bookings, so the carriers can’t use the rail links to deliver new freight. We don’t know how long this is going to be going on … All new rail bookings are closed until further notice, the ocean carriers tell us.”
One bright spot at Oakland: “Evergreen has their own terminal in Oakland and they are open for business and shipping exports more than some of the other Asian carriers. They are providing services to the Middle East and to Vietnam … I think they will be important in the next few weeks.”
This comes at a time when exports are building up with upcoming harvests: “The new crop of almonds will start this week for export and then pistachios, walnuts, hazel nuts, the pecans -everything moves from October 1 to November 15th, everything comes on the market at the same time…”
But with the limited space “we are going to have a difficult season. I think this peak season will be the most difficult on record.”
Service Cutbacks At Seattle/Tacoma and Vancouver
One ocean carrier has moved three ships to the West Coast from the Mediterranean service to focus more on the Asia to U.S. West Coast service and the upshot has been that there have also been cutbacks of sailings from Vancouver and Seattle/Tacoma to Europe and reductions in service from the West Coast to Central and South America.
Snell said: “The upshot is that we have lost export service to Central and South America, as well as to the Mediterranean and Middle East … and exporters have lost vessel sailings out of Vancouver and Seattle/Tacoma.”
He notes that Port Hueneme in Southern California has picked up some business:
“There are some new services operating from Port Hueneme, so these will help exporters, but it’s small port and they are going to South and Central America and not to Asia and the Middle East … Hueneme doesn’t have the infrastructure to handle the bigger container ships.”
Maersk Warns of Worsening Congestion in Southern California & With Rail
Reflecting Snell’s analysis, the ocean container carrier Maersk is reporting worsening congestion around the United States, according to an August 9th Loadstar report.
Maersk reportedly told customers the situation in Southern California had “deteriorated”, with the number of vessels at anchorage doubling over the last few weeks.
On the East Coast and in the Southeast Coast, the carrier said there was a two-week trucking delay adding to container dwell times, with further difficulties in sourcing chassis.
And rail congestion is further exacerbating the delays in US import deliveries and the return of empties to Asia for exports: “Adding to that now are rail car shortages and rail yard capacity limitations that have led to an overall reduction in the number services from the west coast.”
Nationally, Maersk stated: “in the Pacific south-west, chassis availability once again remains the top theme, with several terminals now turning away bobtails to maximise output. Rail dwells into the Midwest is a growing theme as rail car availability remains limited.”
Conclusion
Snell says, “Exporters should be fine if they ship to Shanghai, Hong Kong or Busan because plenty of carriers are transporting imports from there to the West Coast. As long as you have a full container for export, you can book that cargo. But if you are looking for 14 free days for your cargo once it arrives in China that’s gone…you’re lucky if you can get 5 days. The carriers want to turn these containers around in China and not have them sit in port too long. Also, there is adequate service for North Europe from the West Coast. But if you’re exporting to Southern and Southeast Asia then you have a few feeder connections and space is really tough. You’re also going to have problems booking exports to the Middle East, the Mediterranean and South America. And right now, if you’re exporting out of Oakland, Seattle or Vancouver, you’re going to have problems because of carrier service cutbacks.”
Snell hopes to find more booking for exporters: “So, we are block booking a lot of space but you can’t do too much you’ve got to book what you’ve got or you’ll lose your allocation. So, I think it’s going to be a space game and I think I’s going to be really tough out there.”
