September 1, 2006

All is calm at the ports this year

By DC Velocity Staff

Reports of record traffic volumes at the nation's seaports this summer might seem cause for alarm. But one economist says retail shippers can relax. In its monthly Port Tracker report for the National Retail Federation, the economic research firm Global Insight says it appears that the nation's major retail container ports will be able to handle the added workload this fall without the congestion problems that have strained the industry's supply chains in the past.

That strain was most apparent in 2004, when ship logjams at several major U.S. ports caused protracted freight backups during peak shipping season. But for all the added volume, things are different this year, says Paul Bingham, a principal at Global Insight who specializes in global trade. Following 2004's disastrous shipping season, he says, just about everyone in the international supply chain took steps to prevent similar problems in the future. The railroads, for instance, stepped up capital investment and made operational changes, like raising demurrage charges to encourage faster equipment turns.

Bingham says that the railroads have also done a better job managing power and crews and in assembling trains to improve throughput of international containers. "There are still problems," he says. "There's an incident almost every week. The real point for shippers is how fast they can recover." And in that regard, he says, the railroads have improved so that he expects none of the cascading effects—when one delay led to many others—that made recovery so difficult in 2004. "The system is tight, but they are able to act fast," he says.

Shippers, steamship lines, port operators and labor unions have also taken steps to ease the crunch, Bingham notes. Shippers have extended their DC hours. Steamship lines have made changes to their operations so they can do a better job of notifying ports and terminal operators when large vessels are arriving. The ports of Los Angeles and Long Beach have extended their hours and are offering incentives for truckers to pick up containers at off-peak times. Dockworkers have taken on additional shifts. "The collective efforts of all those people have allowed us to deal with record volumes," Bingham says.

Christmas in August?
One way shippers have dealt with the threat of congestion is to begin bringing their imports into the country earlier in the season—what Bingham characterizes as lengthening the peak shipping season. That trend was reflected in the most recent Port Tracker report, which predicted that August volumes would match a typical October, normally the peak shipping month of the year. (The Port Tracker study used as the basis for this story was released in early August.)

Shippers also appear to be shifting volume to alternate gateways. In an attempt to avoid congestion at the ports of Los Angeles and Long Beach, for example, some shippers have been routing their cargo through other West Coast ports, like Seattle and Tacoma. "Many shippers diversified their imports," Bingham says. (The Port Tracker study monitors trends at Los Angeles/Long Beach and Oakland, Calif.; and Tacoma and Seattle, Wash.; on the West Coast, and New York/New Jersey; Hampton Roads, Va.; Charleston, S.C.; and Savannah, Ga., on the East Coast.)

For all their success, Bingham warns that these steps are merely stop-gap measures. With trade increasing faster than the capacity of ports, rails and highways to handle it, the threat of congestion still looms large. "Every year, we've picked off some more of the low hanging fruit," he says. "Longer term, there are some real constraints."

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