As global container prices fall, the number of ships waiting at Los Angeles’ Port of Los Angeles to load goods has dropped 80%. pointing to more easing in supply chain disruptions.
The backlog of vessels waiting outside Los Angeles has fallen from a record high of 109 to 20 and the port moved 876,611 twenty-foot equivalent units (TEUs) in June in its best record in over 100 years.
“We are going box to box, keeping the record we established for the first half of last year. This keeps the cargo moving. Port of Los Angeles Executive director Gene Seroka said that the efficiency of transporting cargo to shore via rail or truck is improving. He spoke to CNBC’s SquawkBox Asia on Friday.
“We reduced that backlog of ships since the beginning of the year … now we want to get that number to zero.”
This is in contrast to delays caused by the pandemics of 2020 and 2021.
At the height of supply chain crisis, these 100 odd vessels idled outside Los Angeles and Long Beach, waiting to unload. A berth was available in a very short time before Covid-19. Domestic transportation was also affected by the pandemic due to shortages of truckers because of Covid-19 infection.
Seroka noted that although conditions were improving, there are still problems. More improvements, including the ability to deliver goods in the interior after vessels have been unloaded, are required.
He stated, “We have to get cargo picked up by the inland railway facilities by importers much faster than they’ve done so far.”
That will help Western Railroads obtain the engine power they need to cruise back to Los Angeles, and continue evacuating the cargo at a much faster rate than what we have seen so far.
Seroka stated that the strike by truckers against California’s recent changes was a protest. “gig worker” law at the Port of OaklandThis should not be a hindrance to the faster pace achieved so far.
As container prices fall, the West Coast is seeing less bottlenecks.
Skyrocketing lease costs were caused by port lockdowns, a lack of containers for 2020 and 2021 and other factors. However, there’s an oversupply now and the prices are falling every September.
Christian Roeloffs, chief executive of logistics platform Container xChange said that the current oversupply is a consequence of a number of market disruptions that started soon after the outbreak in 2020. He also added this in a fresh analysis.
The increase in demand caused congestion at ports to rise and container capacities were held up for an extended period. He said that panic orders of new boxes were made at record rates due to this.
“With the markets opening and the demand softening, oversupply will naturally occur as demand-supply forces balance at new levels.”
Drewry recently released a container leasing report. Drewry estimates that in 2021, the global shipping container pool will reach 50 million tonnes of empty equivalent units (TEUs). Globally there’s a surplus of 6 millions TEUs.
Roeloffs noted that while more containers are welcome for freight payers, they will not see freight prices fall rapidly as disruptions, although less severe, continue to be acute.
New supply chain disruptions will be caused by economic changes such as lower demand due to inflation and monetary policies.
“The major factor that drove up prices is the main one [freight] prices has been a supply-side crunch over the past two years because of lengthening turnaround times of containers … that still holds true,” Roeloffs said.