TRADE WINDS AHEAD: U.S. PORTS FACE THE CHALLENGES OF TODAY AND TOMORROW
Port managers have tried, mightily, to cope with the pandemic’s shockwaves. They have been simultaneously caught up in an avalanche of challenges: trade wars, the pandemic, port congestion and labor and shipping container shortages. Providing as they do the key infrastructure to international trade and the global economy, shipping and ports are estimated to handle more than 80% of global goods trade by volume and over 70% by value.
International maritime trade volumes were estimated to have fallen by 4.1% in 2020, but all of the expert projections suggest that they’ll not recover at any time before the end of this year. During the pandemic, ports have had to adjust to the reality of lower volumes, worker shortages, the implementation of occupational health and safety measures for dockers and shore personnel, and the adoption of teleworking and remote operations for office workers.
The shock of the COVID-19 pandemic has left no port unaffected while exacerbating certain existing challenges. Ports have been heavily impacted by developments in the shipping sector, where some shipping lines have gone into “survival mode,” affecting container and cargo markets, with knock-on effects that may be felt for years to come. The volatility may push some ports to reassess their business models.
Although the pandemic has strengthened the case for further investment in digitalization and innovation, ports are under intense pressure to reduce costs and be more attractive to the supply chains that use their infrastructure. For example, a survey commissioned by the International Association of Ports and Harbors found that 69% of surveyed ports indicated that the majority of their investment plans had been delayed or amended.
Port officials across the country are not wallowing in the gloom and doom. They don’t have time to. No, they are looking ahead to a 2022 filled with strategies to cure (or at least address) what ails them . . . and lies ahead.
Wanted: Congestion Relief
At Morgan Stanley’s ninth annual Laguna Conference, a virtual gathering in mid-September of transportation and logistics industry leaders, Expeditors International of Washington’s management was quoted stating that they had never before seen capacity “so scarce in both air and ocean at the same time.”
Looking to the future, Expeditors expects the environment to “remain unsettled as long as constrained capacity and other disruptions, such as port congestion, the uneven lifting of pandemic-restrictions and rising fuel costs continue to impact the movement of freight.”
A month after that conference, a backlog of ships remained idle off the Southern California coast waiting for their turn to dock, a visual that beachgoers had taken in for the past several months before. And federal regulators at press time were investigating whether the cause of a massive, beach-clearing oil slick was caused by a container ship anchor ripping into a pipeline.
On Oct. 12, 58 container ships were at anchor or adrift off the shoreline, according to the Marine Exchange of Southern California. The following day, President Joe Biden announced a deal to keep the ports of Long Beach and Los Angeles open 24/7 to alleviate the severe bottlenecks.
Providing more time for trucks to pick up and return shipping containers to improve freight movement and reduce delays through the port complex is the main strategy of the Biden plan, although exact details were still being worked out at press time. As Biden and Port of Los Angeles Executive Director Gene Seroka both mentioned, systemic change of such magnitude will necessitate many supply chain stakeholders to work in tandem.
“The significance of today’s announcement is the commitment from industry leaders responsible for moving goods on behalf of American consumers and businesses to open up the capacity needed to deliver,” wrote Seroka in an email, as reported by the online news site Long Beach Post. “It’s a call to action for others to follow.”
That call is certainly not being ignored by Seroka’s partner in maritime, Port of Long Beach Executive Director Mario Cordero, who wrote in a statement of his own, “Before this unprecedented cargo surge began, we believed 24/7 operations were the future. After all, consumers can shop online at any time, whether it’s at 4 p.m. or 4 a.m., and 24/7 is already the standard at our partner ports in Asia. The supply chain truly never stops now.”
Indeed, a month before Biden blew into town, Total Terminals International container terminal on Pier T in Long Beach launched a pilot program that makes it easier for trucks to access the facility during the overnight hours.
“Our waterfront workforce is moving cargo as quickly as possible as we continue to collaborate with stakeholders from throughout the goods movement industry to develop solutions for our capacity challenges,” says Long Beach Harbor Commission President Steven Neal. “This cargo surge is anticipated to last well into 2022, so we need to start thinking of new ways to meet the expected growth in goods movement and rising consumer demand.”
Labor Pain Relief, Too, Please
An insatiable demand for new products is part of the blame for port congestion, which is complicated by “the overarching challenge on the labor front,” J.B. Hunt officials reported during the Laguna Conference. “There are times when certain ports or terminals close for periods of time, creating significant whipsaws in the supply chain. The sooner that cargo can get into warehouses or on the shelf, the sooner capacity is freed up, and that is a major component of what is going on in the system.”
Officials from competitor Werner Enterprises echoed that “on the supply side, the driver issue is expected to remain a problem for a while (potentially exacerbated by vaccine mandates–management estimates less than half of the broader driver population is vaccinated) and the equipment problem looks to actually be getting worse.”
However, there is some silver lining to all the gloom and doom. An especially strong holiday shopping season to end topsy-turvy 2021 may lessen the sting of expected underperformance into at least early 2022, the Werner team reported.
Union Pacific officials, who are also dealing with slow unloading of containers due to port and driver labor issues, noted that “while there are structural issues in that system, there is also capacity to staff up and get trucks in place. The West Coast ports are also looking to put things into place (automation, union deals, etc.) to get the network moving smoother.”
Investment in new technology seems to be the answer to everything along the supply chain these days, and the port’s portion is no exception. San Francisco tech company Vector claims its electronic bill of lading solution can get drivers in and out of facilities more quickly, to the tune of 43 minutes of drive time.
How huge is that? Mega-huge. According to David Correll, co-director of the Massachusetts Institute of Technology Freight Lab, if drivers get just 12 minutes back toward driving, the “truck driver issue” could be solved.
Rebuild, Remodel, Rehabilitate, Rebound
Biden pivoted during his 24/7 announcement to promote his landmark infrastructure bill, which includes $17 billion for port infrastructure, or the “biggest investment in our ports in our history.”
However, with Republicans balking at the bill’s $4.5 trillion cost (at this writing) and infighting among Democrats over whether to trim or not to trim the price tag to make it more palatable, the legislation remains tied up in Congress (ditto).
It’s a shame, to hear Seroka tell it. He claims West Coast ports have experienced more than a decade of underinvestment by the federal government and that had better change to address the influx/lack of movement of cargo.
Of course, ports around the country are not waiting on the government to make major infrastructure improvements. For a deeper dive on many of these, see the story elsewhere in this issue by Mary Scott Nabers, president and CEO of Strategic Partnerships Inc. But for improvements with an eye toward sustainability, we look to the Utah Inland Port Authority (UIPA), whose board of directors recently approved the creation of a funding mechanism for six new projects that will reduce current air emissions and improve rail access for in-state businesses.
A new transloading/cross-dock facility adjacent to the Union Pacific Intermodal Railyard will offer international and domestic cargo stakeholders a cost-effective and efficient inland alternative option by leveraging existing infrastructure and Union Pacific’s services and proximity to the rail ramp in Salt Lake City, according to the UIPA. An investment-grade business case analysis commissioned by the UIPA identified at minimum the three California port gateways—Los Angeles, Long Beach and Oakland—for the transloading facility to compete with for international cargo volumes.
The transload facility will be constructed with eco-friendly building materials and include sustainable construction technology, increased water and energy efficiency, reduced waste and emissions and improved indoor environmental quality, according to the UIPA.
The port authority is also seeking to acquire an easement across a privately-owned landfill to open up rail access north of Interstate 80, an existing rail spur and test track that connects to a short line, and the blessing of Salt Lake County officials to provide additional freight connectivity by building out 7200 West from State Route 201 to 700 North.
The UIPA is working with partners to develop a renewable fueling station for private and/or public use that will serve hydrogen, electric and liquid and compressed natural gas vehicles, and with the Department of Homeland Security to reassign agents to Utah for a customs bonded facility with rail access, loading docks for bonded warehousing and storage capacity.
“All these projects are designed to address gaps currently in Utah’s logistic system, which is the primary role of the port authority,” said Jack Hedge, UIPA executive director. “Providing this underlying infrastructure supports the entire ecosystem of the jurisdictional area–from a logistics standpoint, to the environment, to the community–everyone benefits.”
Let’s Be Careful Out There
The Jacksonville Port Authority (JAXPORT) also has coming improvements aimed at maintaining the Florida facility’s ranking as the 10th busiest container port in the U.S. by TEUs and among the nation’s top vehicle-handling ports. But JAXPORT also has security on its mind, as demonstrated by a new program that brings together tenants, vessel operators, rail and intermodal stakeholders, key vendors, and local public sector organizations.
To address a national priority initiative of the U.S. Coast Guard Sector Jacksonville Captain of the Port, JAXPORT has partnered with the nonprofit Maritime Transportation System Information Sharing and Analysis Center to form a new cybersecurity information sharing cooperative called the Northeast Florida Maritime Information Exchange (NEFL-MIX).
“Cybersecurity is a critical part of supply chain security,” says JAXPORT CEO Eric Green. “We are thrilled to launch this important initiative to protect our maritime community from cyber threats and ensure that our port-related businesses can continue to do the important work they do to keep cargo moving and people working throughout Northeast Florida.”
JAXPORT’s involvement does not surprise Christy Coffey, vice president of Operations with for the Maritime Transportation System Information Sharing and Analysis Center. “They have been influential in the design of our Information Exchange program and an active contributor to our [center] since inception,” she says, “so it’s rewarding to see the NEFL-MIX become reality. This busy port has included a diverse group of stakeholders in their cybersecurity information exchange. We know that under JAXPORT’s thoughtful leadership, the NEFL-MIX will positively impact both cybersecurity preparedness and response.”
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