65 cargo ships queue outside America’s biggest ports in supply chain disruption

Consumers face shortages and price hikes as supply chain snarls continue

Oliver O'Connell
New York
Wednesday 22 September 2021 23:27 BST

Related Video: Shipping container shortage could cause holiday gifts fiasco

Dozens of cargo ships are stuck outside two of the US’s biggest ports as supply chain problems continue to bite the global economy.

More than 65 vessels are queuing in San Pedro Bay outside the ports of Los Angeles and Long Beach, which together handle 40 per cent of all cargo containers entering the nation.

Prior to the Covid-19 pandemic, it was rare for more than one to wait to dock at the ports. At the weekend it was a record 73 ships, double the number seen in August.

As the US economy has rebounded and businesses have reopened, surging demand for imports has led to massive delays on the supply side as the world’s logistics and shipping industry struggle to return to pre-pandemic norms.

While US consumers have not fully resumed their previous spending on restaurants and travel, Reuters reports, they continue to splurge on physical goods ranging from appliances and home exercise equipment to sweatpants and toys. The vast majority of which is imported — usually by ship from Asia.

Backlogs in shipping have resulted in shortages of everything from raw materials to finished goods, and consumer prices are rising as a result.

The fundamental driver to this resurgence of inflation is the response to the Covid crisis and the lockdown of the economy by governments around the world, Michael Ashton, who runs a boutique investment management consultancy focused on inflation and is known on Twitter as “Inflation Guy”, told The Independent in an interview. Central banks created liquidity for additional spending to keep the economy moving and this put a lot of money into consumer’s hands.

When economies reopened and pent-up demand came roaring back from consumers, the supply side could not come back as quickly as long, often intricate, global supply chains were still snarled up from the pandemic lockdown. Normally when coming out of a recession demand and supply grow gradually in tandem, but the latter could not meet the demand for physical goods.

“This was an unforced error in a sense by central banks and governments, in that they overspent and over-financed the recovery,” says Mr Ashton.

“Add to this dramatically increased shipping costs, and multiple supply chain problems at all levels from raw materials — such as polypropylene, lumber, and steel or raw iron — all the way up to finished goods, and you have a situation where the lead times for some products are so long that people are being told to order Christmas gifts now.”

There is a concerted effort to try and ease the backlog on the US side, even as supply chain snarls are reported across the world. In late August the White House announced John Porcari as port envoy to the Biden-Harris administration’s Supply Chain Task Force.

For their part, the two Californian ports have agreed to expand the hours during which trucks can collect and return containers, and some ships are being diverted to other points of entry — though they are also struggling with capacity issues.

“For the full year we’re now estimating 10.8 million twenty-foot equivalent units, and if achieved, that would be a 14 per cent increase over 2018 — which was our best calendar year performance in the course of the 114-year history,” Port of Los Angeles executive director Gene Seroka told The Los Angeles Business Journal.

In Long Beach, imports were up 11.7 per cent last month, the best August on record. “It’s peak season now, but we’re likely to see continued cargo growth well into 2022,” executive director Mario Cordero told the outlet.

While the southern Californian ports deal mostly with imports from China and other parts of Asia, it is a similar story on the east coast, with congestion reported in Savannah and Miami.

In New York, which ranks second as the busiest cargo entry point, the main problem caused by the record amount of cargo is congestion in moving goods beyond the port by truck and freight rail.

Similarly, once off the ships in Los Angeles, containers are waiting on the docks as long as six days for truck pickup, Mr Seroka told Reuters. Containers on chassis are waiting 8.5 days “on the street” for warehouse space or to be returned empty to the port.

Container ships are anchored by the ports of Long Beach and Los Angeles as they wait to offload on 20 September, 2021

There are nearly 8,000 containers ready to be taken away by train, with the wait clocking in at 11.7 days, he added.

Companies such as Walmart are investing heavily to improve their operations in and around ports to try and keep their shelves stocked. There is particular concern about ensuring an adequate supply of goods for the holiday season.

Ports predict that bottlenecks will last well into 2022 while kinks are worked out around the world.

Supply chains are still reeling from temporary pandemic closures of ports and factories in Asia; and shortages of shipping containers — many of which were stuck empty in ports for months — and key products such as resin and computer chips.

Severe weather this summer has not helped matters at ports such as New Orleans, Houston, and Miami.

Transportation costs are also spiking, exacerbating delays, and further fuelling product shortages.

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