West Coast port vessel buildup shows maritime supply chain breaking

The number of vessels due to dock at the Port of Los Angeles and Long Beach is increasing as labor slowdowns at West Coast port terminals have impacted supply chain operations, from trucks to rails and ocean carriers.

On Wednesday, six vessels were delayed at the Port of Los Angeles, while two vessels at the Port of Long Beach were at anchor on arrival — unable to interface with the port operations, according to a vessel update announced by the Marine Exchange of Southern California & Vessel Traffic Service, Los Angeles and Long Beach.

Data from MarineTraffic shows that vessel problems are shifting from isolated to more pervasive. Over the past two-and-a-half months, average wait times at anchorage in LA were between a half-day to one-and-a-half days, with service time averaging of two to five days. 

At the APL Terminals in LA, docked vessels are now occupying space for as many as nine days.

“This indicates we’ve broken past the ‘normal’ and are back into a stressed maritime supply chain,” said Captain Adil Ashiq,  Head of North America for MarineTraffic. He said these vessels have yet to be loaded/offloaded and sent away, critical to make room for the next wave of vessels heading to Los Angeles. “The ripple effect may be a hard thing to swallow considering that we will have imports sitting idle and exports sitting idle,” he said.

One of the vessel that was waiting to enter the Port of Los Angeles on Wednesday was the MSC JEONGMIN, whose journey has been documented using CNBC Supply Chain Heat Map data provider MarineTraffic, and was an early example of how the spike in labor issues at West Coast ports was beginning to hit ocean operations. The vessel — carrying products including tires for Tesla, IKEA furniture, Trader Joe’s food, Europe wine, porcelain tile and granite slab — left the Port of Oakland on May 31. It was later seen circling for a day before the vessel was due at LA, but when the vessel arrived on Wednesday it was turned around, and rescheduled to arrive later in the day.

At the Port of Los Angeles, the CMA CGN Lyra has been at the dock since May 31; CMA CGM Amerigo Vespucci has been there since June 1. At the Ports America Terminal, the YM Unicorn has been docked since May 31 and One Hangshou Bay has been docked since June 2.

When vessels go off schedule, the delays slide the arrival to additional ports, impacting their container deliveries, and ultimately contributing to container congestion, which was seen in the extreme during the Covid pandemic.

The Vespucci’s next stop is Oakland, which also has vessels backed up because of labor issues which led to shutdowns late last week. The contents in the containers for Oakland are already behind schedule for arrival. These developments come as shipping enters it peak inventory build season ahead of back-to-school and the holidays, a period which runs from July to October. While overall demand is expected to be relatively muted given the economic environment and slowing consumer demand, West Coast ports have been gaining back volume they lost to East Coast ports over the past year as the uncertainty in the ongoing labor negotiations led shippers to divert activity.

Port operations are critical to both trucks and rails, which are the ground industries impacted if containers cannot move efficiently. Import container activity has been improving, but the processing of exports was still very high on Wednesday. Earlier this week, Union Pacific had to temporarily pause its ramp activity at California ports. While Union Pacific lifted that pause on Wednesday, ITS Logistics raised its freight rail alert level to ‘red’ this week, representing severe risk.

The National Retail Federation issued a statement earlier this week urging the Biden administration to intervene in the ongoing labor talks between the International Longshore and Warehouse Union and Pacific Maritime Association, which represents the West Coast ports.

On Wednesday, the National Association of Manufacturers issued a letter to President Biden and Transportation Secretary Pete Buttigieg, describing the current port conditions as “closed or significantly disrupted” up and down the West Coast, and asking the the administration to step in.

The trade groups have warned of inflationary spikes from new supply chain hiccups, though overall, global supply chain costs have come way down from Covid peak levels, according to the global supply chain index managed by the New York Fed.

Throughout the recent spike in labor tensions, some union workers have refused to show up for shifts, while others have been pulled off the job by port management. The volatile situation at ports continued on Wednesday, with CNBC told that the SSA Terminal at the Port of Seattle relieved union labor gangs working on vessels for the third day in a row due to “low productivity.” In maritime terms, a terminal can “fire” a labor gang for one shift if they perceive the work to be slow, and the workers can return the next day. The terminal at the Port of Tacoma continues to operate, despite reports of 50% worker productivity.

Secretary Buttigieg and General Stephen Lyons (who is the Supply Chain Envoy to the Biden-Harris Administration Supply Chain Disruptions Task Force) have been engaged with parties for the last year-plus as negotiations have progressed, and have encouraged all parties to work in good faith to reach a deal. 

The Biden administration and Congress stepped in late last year to avert a freight railroad strike that could have shut down the national economy.