A sharp growth in container ship sizes and alliances among the world’s biggest shipping operators is overwhelming U.S. major gateway ports during peak periods, costing millions to importers and exporters who can’t access their cargo on time and prompting the country’s marine watchdog to warn of legal action if the parties don’t deal with the mess.
Container shipping, which moves over 95% of the world’s manufactured goods, is largely controlled by around 15 mostly European and Asian operators, which recently have accelerated the pooling of operations within giant alliances to cut costs. Long a feature of maritime shipping, the alliances have grown in recent years as carriers have introduced bigger vessels that are least twice the size of those calling on U.S. ports for years.
The economic imperatives of carriers trying to get the most out of the new ships meet the cargo-handling limitations at ports such as those the largest U.S. gateways at Los Angeles and Long Beach. Upon arrival, containers often are randomly unloaded, which swamps terminal operators as they try to organize the metal boxes in stacks and move them to specific destinations by truck or rail.
“Existing terminals were designed two decades ago to handle ships half the size of today’s vessels, and with the alliances, six ships belonging to the same alliance can show up at five different terminals in Los Angeles and Long Beach.” said Gene Seroka, executive director at the Port of Los Angeles. “This disperses cargo over a wider array of facilities making it challenging for truckers to pick the containers as well for western railways to amass the cargo and move it to specific destinations.
“We have 13 different terminals in Southern California. So there is a lot of confusion in picking up cargo,” said Mr. Seroka.
For years, the workhorse vessel that moved goods across the Pacific had a capacity to carry between 5,000 and 7,000 containers and it would take up to 10 hours to move a container from the port. But over the past couple of years, ships calling at West Coast ports have doubled in size. At the height of the peak period late last year the congestion was so severe that it would take up to eight days to move a container out of port and on to major importers of Asian goods such as Wal-Mart Inc., Home Depot Inc. and others.
Mr. Seroka said that on average terminal operators had to pay $3 million in added spending a week to deal with the congestion.
California ports handle the largest share of cargo moved from and to Asia, everything from clothing and home appliances to toys, luxury goods and electronics coming in and packaged food, fresh produce and scrap metal going out. Peak periods include September and October when retailers prepare for the Christmas holidays and the first-quarter period before the Lunar New Year, when U.S. importers typically stock up for spring before Chinese factories shut down for up to two weeks.
Jon Slangerup, chief executive at the Port of Long Beach, says that as ships get bigger, they call to more ports in Asia where containers are loaded randomly, with little attention to the ownership of the containers or their final destination. When docking at multiple terminals at the West Coast, unloading the ships is also done randomly, straining port operators and truckers as they try to figure out which box goes where.
Historically, a single ship had its containers stocked in blocks, with each block destined for a particular location by a particular mode of transport. The process known as block stowage was for decades the preferred method for port operators and it worked well.
“In the past, we handled a container one to three times before it left port, Mr. Slangerup said. “Now, at peak times, it is five to eight times, and when it happened last year nobody really understood the magnitude of the problem. It wasn’t expected or planned for and so the physical gridlock that ensued was very serious.”
Jonathan Gold, vice president of National Retail Federation which represents 18,000 U.S. retailers, says members also have been levied by shipping companies with congestion charges to compensate for the for the extra time a vessel stays at port while cargo is being shorted out.
“It’s a very large issue that adds major costs to cargo owners,” he said. “We want to see better port operations overall that moves cargo quickly. We need a wider conversation with everyone involved in the supply chain, but it will take years to deal with the problem