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The ports of Los Angeles and Long Beach are currently experiencing severe congestion, with a heavy backup of containers waiting to unload import cargo from Asia. In this conversation with SupplyChainBrain Editor-in-Chief Bob Bowman, Jason Totah, president of Odyssey International Services Inc., discusses alternatives to bringing cargo through overtaxed West Coast ports.
SCB: What’s the situation at the ports of Los Angeles and Long Beach right now?
Totah: It's quite a logjam, from unloading ships to making containers and chassis available at the port, and appointments to pick up containers. It's a pretty desperate situation.
SCB: What’s the cause of this congestion?
Totah: Just a lack of planning across the board. This season in particular has been more severe than others because of the pandemic, extra volume, and the vessel alliances omitting and consolidating ports. For various reasons, it’s creating this huge logjam.
SCB: Shouldn’t volumes be slacking off after the holiday peak season, and into Chinese New Year?
Totah: We've always had a peak past December, ahead of Chinese New Year. People are uncertain about when factories are going to come back online after Chinese New Year, and the possibility of labor in China being quarantined when they do come back. So everybody's trying to buy a lot sooner. The anticipation of delays is what’s causing these problems.
SCB: What are you proposing as an alternative for shippers who don't want to deal with congestion at Long Beach and Los Angeles?
Totah: Our advice has been to have a lot more elasticity in their supply chain, look at different options, and not put all their eggs in one basket. Alternatives would be to use the ports of Seattle or Tacoma as a gateway. Or maybe Oakland, even though there's not a lot of direct sailings or vessels calling there direct.
SCB: Are Seattle and Tacoma first ports of call inbound from Asia, and last ports of call outbound? Are there a sufficient number of sailings like that in order to take the overflow from L.A./Long Beach?
Totah: Yes. Seattle-Tacoma is either the fourth- or fifth-largest containerport complex in the United States, combining in the Northwest Seaport Alliance. They have quite a lot of sailings coming in. They’re not the super-max vessels, but there are direct sailings from major ports in Asia.
SCB: What about infrastructure beyond the piers in Seattle and Tacoma, such as on-dock or near-dock rail transfer yards, and the ability to transload into trucks as well? Is there adequate capacity for that up there?
Totah: It's adequate today for the volume they have, but with proper planning it can be scaled. There are a few terminals that have on-dock rail. There’s a similar lack of trucks and chassis, but at smaller scale, than in L.A. and Long Beach.
SCB: How about coming into the Port of Vancouver, British Columbia, then transiting by rail across Canada and down into the U.S. Midwest? Is that an option?
Totah: That has always been an option. Many importers have used it in the past, and it has a customs advantage on valuation because importers don't pay a harbor maintenance fee when goods arrive at ports in Canada. But the Canadian rails are also congested. You'll have some people using them, but if you don't do it regularly, you're not going to have access to those routings because steamship lines have dedicated space for the people who do.
SCB: Are the lines intent on keeping incoming international containers at the port, so that they can expedite their return to Asia? And does that necessitate transloading inbound cargo into domestic equipment to go inland?
Totah: Yes. Carriers are very reluctant to accept bookings beyond the West Coast. They can give you containers to load your product in, but they don't want to give you containers to go inland.
SCB: So you have to transload. Is that a good idea anyway? Or does it slow things down?
Totah: Transloading has been a good idea in our view, especially at Seattle/Tacoma, to certain parts of the United States. I'm not proposing that transloading from there into the Southeast is a good option, because the connectivity on the rail isn’t that great. But there are direct points from Seattle/Tacoma to Chicago, Minneapolis, and the Ohio Valley that can offer faster transit time, because international containers don't move regularly. Domestic trailers move on a daily basis, versus maybe weekly for ocean containers. And congestion at inland rail hubs isn’t as bad for domestic containers. So in terms of transit time and price from port to door, we find that transloading is very competitive.
SCB: When we talk about onward transportation of cargo offloaded on the West Coast and moving into the Midwest, is that mostly by rail? Or does long-haul truck offer an alternative?
Totah: Long-haul over-the-road capacity has been declining for the last several years. There’s a big migration to intermodal. I think that domestic intermodal services are a lot more effective than over-the-road because there’s no limitation on hours of service, or the need for team drivers to deliver the cargo.
SCB: What about bypassing the West Coast altogether, through the Panama Canal and up the East Coast? Is that a viable option today for shippers?
Totah: I think it is. A lot of shippers are based on the East Coast and use all-water services to get there. The demand for it is great, and similar to what I mentioned about going through Vancouver, B.C. Shippers who use the service regularly are committed to it, and give steamship lines the base loads to go in there. It's not easy for you just to flip-flop to the East Coast based on your needs, because you may not get the space. Up until the last couple of years, there was more demand on the all-water service than via the West Coast. So that’s already at capacity, too.
SCB: What about going in the other direction — from East Asian ports through the Suez Canal, then via transatlantic service to the East Coast?
Totah: It does work from the subcontinent — India, Pakistan, Bangladesh, Sri Lanka, and maybe Singapore, but not from Northeast Asian ports such as Hong Kong. It just adds way too much time. Plus congestion and capacity constraints aren’t limited to the North America trade. It's also to Europe and other areas. The longer the transit on the water, the more capacity just gets sucked out of the system.
SCB: Do you believe this situation is going to persist throughout 2021?
Totah: I don't see how it wouldn't. What we need is a true investment in our industry — for stakeholders to buy more equipment, including containers and chassis, and add vessels. For international trade worldwide, I can't see it slowing down.
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