Month: <span>February 2021</span>

With the ports of Los Angeles and Long Beach expected to be grappling with terminal congestion and vessel backlogs for at least the next two to three months, trans-Pacific carriers are boosting capacity to Oakland and Seattle-Tacoma. 

According to Wednesday’s issue of Alphaliner, ZIM Integrated Shipping Services will launch a service beginning Feb. 21 that will call in Southeast Asia, Los Angeles, Tacoma, and Vladivostok, Russia, before returning to Laem Chabang, Thailand. 

Alphaliner also reported that Wan Hai Lines in mid-March will double its current two trans-Pacific strings to four, which includes a new Pacific Northwest service from North Asia to Seattle and Oakland that will not call in Southern California. 

While these developments demonstrate the continued importance of Los Angeles-Long Beach to trans-Pacific services, the new Wan Hai service also highlights a move by carriers to increase their direct calls to the Northwest Seaport Alliance of Seattle and Tacoma, and to Oakland, to bypass congested Southern California ports. 

The executive directors of Oakland and the Northwest Seaport Alliance told JOC.com this week carriers are in advanced stages of planning additional services to their ports. Those services will be designed for intermodal shipments to the US interior that otherwise could have moved through Los Angeles-Long Beach, but more importantly, will serve distribution warehouses and e-commerce shipments in Northern California and the Pacific Northwest. 

Danny Wan, executive director of the Port of Oakland, said his pitch to carriers is not so much that Oakland is an alternative to Los Angeles-Long Beach, but rather that it is the closest port to the large consuming market in the San Francisco Bay area, and to import distribution hubs in Northern California, Reno, Salt Lake City, and Denver. 

“Yes, we may pick up some business diverted from Southern California, but once they come here they will stay here because Oakland is more convenient to these markets,” Wan said. 

Oakland and Seattle-Tacoma are assuring carriers that they have the terminal capacity to handle an influx of cargo, and that upon arrival their vessels will be able to proceed immediately to berth. 

“We have no vessels at anchor here,” said John Wolfe, executive director of the Northwest Seaport Alliance of Seattle and Tacoma. “Every terminal here has unused capacity.” 

Due to a sustained cargo surge that is now in its eighth month, and is projected to continue well into the spring, Los Angeles-Long Beach is experiencing vessel backlogs and congested marine terminals. Vessel delays in the port complex average about seven days, according to the Signal platform published daily by the Port of Los Angeles. Container dwell times at the terminals in December averaged five days, or twice what they were last spring, according to the Pacific Merchant Shipping Association. 

Terminal operators in Los Angeles-Long Beach told JOC.com that container volumes will remain much stronger than in past years this spring, and they said the ports will contend with congestion well into the second quarter. 

Carriers have already begun to circumvent Southern California with new services to Oakland and Seattle-Tacoma. In the past two months, carriers have announced two new trans-Pacific services to North America’s Pacific Coast that do not call Los Angeles-Long Beach first. CMA CGM launched its Golden Gate Bridge service (a restructuring of the former SeaPriority Express service) with a rotation of Yantian, Oakland, Seattle, Shanghai, and Yantian. 

Also, Mediterranean Shipping Co. in December started its Chinook service with a rotation of Yantian, Shanghai, Busan, Vancouver, and Yantian.

Oakland, Seattle-Tacoma advantages 

The port directors in Seattle-Tacoma and Oakland told JOC.com other announcements of direct services to their gateways could follow this spring, although they did not specify which carriers they are speaking with. They said their discussions with carriers begin with the logistics advantages their ports offer. 

Wolfe stressed the ability of vessels to proceed directly to berth in Seattle-Tacoma without having to wait at anchor. He said container discharges begin quickly upon berthing, and the first train with intermodal shipments destined for the Midwest leaves within 48 hours of container discharges from the vessel. Except for some sporadic equipment shortages, the railroads have provided the rail-car capacity the port complex requires, he said. 

When a vessel berths in Oakland, it is usually turned in one, two, or three eight-hour shifts, depending upon the container exchange, said Bryan Brandes, the port’s maritime director. Container moves to and from trains at the port’s on-dock rail yard are likewise rapid, he said. Also, the port offers transloading operations within its boundaries at the former Oakland Army Base, which has been redeveloped as a logistics hub for import and export operations, Brandes noted. 

Oakland, however, continues to grapple with lengthy truck turn times. In January, turn times averaged 96 minutes, higher than the 88-minute average in Los Angeles-Long Beach, according to the Harbor Trucking Association (HTA), which measures turn times in both gateways. Average truck turn times in Oakland the past year have been in the range of 82 to 98 minutes, while turn times in Los Angeles-Long Beach were in the 70 to 88-minute range, according to the HTA’s truck mobility data. 

Oakland International Container Terminal (OICT), which handles about 70 percent of the port’s volume, pushed up the port’s total average turn times last month as one of its four berths was out of commission for 16 days while OICT discharged three new ship-to-shore cranes, Brandes said. He expects turn times to improve now that the cranes have been installed at OICT. 

Wolfe and Brandes commended the longshore labor force, which continues to work through the COVID-19 pandemic conditions without serious disruption. According to the Pacific Maritime Association, which manages the coastwide waterfront contract with the International Longshore & Warehouse Union, only about 100 longshore workers combined in the northern ports of Oakland, Portland, and Seattle-Tacoma tested positive for COVID-19 in December. Los Angeles-Long Beach recorded 360 positive cases, which contributed to labor shortages in Southern California. 

Oakland and Seattle-Tacoma are not marketing themselves as temporary refuges for carriers to escape crowded conditions in Los Angeles-Long Beach, but rather as long-term investments in gateways that provide immediate access to rapidly growing distribution complexes, direct rail access to intermodal hubs in the US interior, and affluent consumers that generate a strong base of on-line shopping. 

“It’s because of that stickiness that Oakland warrants services of its own” Brandes said. 

While Oakland seeks to attract new trans-Pacific services, Larry Burns, president of Lawrence Burns Consulting and former senior vice president of trade and sales at HMM, said simply changing the rotation of a Pacific Southwest service to call first in Oakland and then in Southern California would allow a carrier to quickly discharge local and intermodal cargo in the Northern California gateway while not having to bypass Southern California altogether, which would offer certain advantages to carriers and their customers. 

Carriers could carry time-sensitive inbound loads for the regional market in Northern California without the schedule disruption that comes from calling first in Southern California. They would also take delivery of export loads in Oakland, which has consistently strong export volumes. The vessels would then call in Los Angeles-Long Beach to pick up empty containers for repositioning in Asia, where there are severe shortages of empty containers.

“The carrier keeps to its schedule and also picks up empties in LA. Suddenly the empties become more valuable,” Burns said.

With a truce between Montreal waterfront employers and longshore workers expiring in approximately five weeks, importers have been diverting cargo away from Canada’s second-largest port rather than risk disruption similar to the 19 days of strike actions that crippled the port last summer. 

The Maritime Employers Association (MEA) and Canadian Union of Public Employees (CUPE) were back at the negotiating table this week, capping a 14-day “mediation blitz,” Kuehne + Nagle told customers in a Friday advisory. Negotiations deteriorated several weeks ago but have since restarted, according to two shipping executives close to the matter. 

A misconception about the August 2020 strike at Montreal was that it was settled; it wasn’t. Rather, what ended the 19-day series of work stoppages on Aug. 21 was a truce that left critical work rule issues unresolved. That leaves open the real possibility that after the temporary agreement expires on March 20, disruption could resume. It took eastern Canadian ports months to recover from disruption over the summer, as a shortage of railcars at Halifax and Saint John due to a surge of cargo at Vancouver and Prince Rupert delayed cargo diverted from Montreal, and Montreal terminals had to clear a 11,500-container backlog. 

At the time, Pierre Fitzgibbon, Quebec’s minister of economy and innovation, said the closure of the port had a greater economic impact on Canada than the COVID-19 pandemic itself. 

Now, with personal protective equipment (PPE) still critical amid a multi-month surge of Asian cargo into Canada and the United States, strike actions would be even more disruptive to cargo flows through eastern Canada and the country’s economy. 

Further disruption would also hurt Montreal’s competitiveness as it faces growing competition from existing and planned Eastern Canada ports for so-called discretionary shipments moving to and from inland regions. As has been seen on the US West Coast, shippers have long memories and will permanently redirect cargo through alternative gateways when they perceive a port to have elevated labor risk. 

Some major shippers have told the Montreal Port Authority that they’ve instructed container lines to divert cargo away from the port if no agreement was reached by mid-January, said Tony Boemi, vice president of growth and development for the port authority. Two Canada-based importers who asked not to be identified told JOC.com they began diverting cargo away from Montreal months ago, with one using the Canadian West Coast and other routing more goods through Halifax. 

In the truce announced Aug. 21, employers and labor agreed to not speak to the media, but both sides said they were confident they would reach a deal before the truce expires. The current MEA-CUPE labor contract expired at the end of 2018, with labor seeking higher wages through more days off per year and greater control of hiring, and employers resisting such demands.  Starting in early July, port longshore workers engaged in two four-day strikes before launching an indefinite strike on Aug. 10 that ended up lasting 12 days. 

In a Feb 4 interview with JOC.com, Jean-Jacques Ruest, president and CEO of Canadian National Railway, said the railroad is better prepared to handle potential diversions from Montreal to Saint John and Halifax than it was over the summer. When longshore workers issued the first 72-hour strike notice in late July, it was a surprising escalation of simmering tensions and there was plenty of inbound cargo already on the water headed to Montreal, he said.

Ruest said shippers should ready diversion strategies, whether moving through Halifax and Saint John or with the railroad’s joint service with CSX Transportation connecting to the Port of New York and New Jersey. Cargo destined for Montreal could also be trucked up from New York-New Jersey. Ruest warned that if Montreal-bound cargo is diverted, the railroad will prioritize cargo not bound for greater Montreal and imports for Montreal might not be transported to the region until labor actions end, as CN has limited capacity to handle all the potentially delivered volumes.

The Montreal strikes also spurred Canadian Pacific Railway to begin providing intermodal rail service to Saint John to handle three Hapag-Lloyd ships and one Maersk ship diverted from Montreal over the summer. In extending its agreement with CP, Hapag-Lloyd, which has the largest presence in serving Canada, said it would add Halifax to its new service network, which is generally announced in the spring.

CMA CGM’s newly restructured Asian service that makes Oakland its first US port call rather than Los Angeles allows e-commerce shippers and other importers to avoid Southern California port congestion and get their cargo loaded onto trains days faster. 

The Golden Gate Bridge service, formerly known as SeaPriority Express, offers a 12-day transit from Yantian and a 19-day transit from Shanghai. The service is the first Asian service with Oakland as its first call, a long sought-after designation that makes the port more attractive to time-sensitive shippers.  

After its first call at Oakland on Feb. 12, the restructured service will call on Seattle before looping back to Kaohsiung, Taiwan; Shanghai; and Yantian, mainland China. The ships will each have capacities in the ranges of 3,718 to 6,282 TEU. In its original form, the service called only Los Angeles and Yantian. 

“We had to find an alternative solution that allows supply chains to remain relatively intact and improve transit times so we made that bold move to Oakland,” Ed Aldridge, president of CMA CGM and APL, United States, said in an interview Monday. Aldridge said he does not expect congestion to clear up in Southern California until June at the earliest and the restructured service will be permanent. 

And while ocean reliability from Asia to the US West Coast has sunk — falling to 22.1 percent in December — the service will not be delayed by the harbor backlog at the Los Angeles and Long Beach port complex. As of Sunday, there were 29 container ships at berth and 36 at anchor, according to the Marine Exchange of Southern California, the agency that manages ship traffic. 

Through advance work with Union Pacific and BNSF railroads and SSA Marine’s Oakland International Container Terminal, CMA CGM aims to provide a rail dwell time — the time it takes for a container to be unloaded from a ship and loaded onto a train — of under one-and-half days, Aldridge said. Comparatively, average dwell times in Southern California during non-congestion times is roughly four days, he said. 

Aldridge said US importers that are tapping the newly restructured service include a mix of brick-and-mortar retailers pulling for e-commerce channels, strictly e-commerce apparel and garment shippers, and even some shippers looking to truck goods down to Southern California.

The newly restructured service, he said, shows how CMA CGM is boosting its ocean and landside capacity to help shippers amid a record rush of Asia imports that began in the second half of last year and has not relented. Between May and December, CMA CGM deployed 25 extra-loaders on the trans-Pacific, boosting capacity by 114,500 TEU, and upgraded the sizes of 13 ships on Asia-US services. Ultimately, CMA CGM increased total capacity on the trade by 39 percent between the first and second half of 2020.

The carrier is also doubling its dedicated chassis fleet serving Southern California to 3,600, and expanded the number of dray providers it works with.