Tired of West Coast Port Congestion? Look at Houston or Savannah | 05/23/2021
If you are not invested in the logistics industry, you would be forgiven for thinking that the only sources of congestion and angst are the twin ports of Los Angeles and Long Beach in Southern California. Stories, images and videos flooded the airwaves when, at the worst of events in February, dozens of ships were anchored in San Pedro Bay awaiting their turn to disembark.
The images are only beginning to scratch the surface of current market conditions plagued by chronic container shortages, with an increasing number of export containers left empty rather than filled with U.S. exports and import rates that have virtually quadrupled or quintupled compared to March of last year.
“Get away from Southern California and the West Coast” is the rallying cry. “There are opportunities elsewhere,” urge logistics officials.
These opportunities are found on the Gulf Coast and the Southeast, particularly in Houston and Savannah. Both ports have seen incredible increases in containerized volumes that started before the pandemic and, since last summer’s resurgence, have only continued to skyrocket.
But what are the realistic opportunities? Are these two ports the balm of what plagues America’s greatest trade route and port complex?
It’s a little yes and no.
Ready for growth
Houston became the sixth largest container port in the United States and experienced the fastest growth in 2019, according to IHS Markit. The relocation of a number of manufacturers to Texas and the creation of direct distribution channels to feed these businesses and consumers have directly contributed to this growth. Best known only for its prominence and leadership as an oil and gas project port, Houston processed 297,397 TEUs in March, the highest monthly figure in their history.
Despite the impact of the pandemic in early 2020, Houston managed to manage 2.99 million TEUs for 2020, just over 800 TEUs below their previously held record for all of 2019.
Houston is also THE Alliance’s first call for new East Coast service.
Meanwhile, Savannah is growing at an even faster rate. Investments in city-side rail, dredging and berth recovery led to a 1.8% increase in 2020 despite pandemic conditions and in March of this year they increased by 48% year-on-year to nearly 500.00 TEUs. .
In the short term, Savannah plans to add 650,000 TEUs of annual yard capacity at one terminal, straighten out a turn to allow simultaneous handling of four 16,000 TEU vessels on another, and by June 2023, process 7.5 million TEUs per year.
While both of these ports are seemingly on the cusp of success when you look at their overall volumes, there are some tough questions to ask as to whether or not either can escalate under current pandemic conditions and what happens to the cargo when it arrives at their docks. and how does it get to where it needs to go next?
Two of Southern California’s intrinsic advantages for shippers have been offloading to dock rail for domestic movements and a strong warehouse and trucking capacity for transshipment and domestic distribution of eastbound freight. . The possibility of being on an indoor railroad ramp five to seven days later overshadowed anything a ship crossing the Panama Canal could handle for time to market. For transshipped cargo, even days faster with team drivers for the most urgent shipments.
But with rail delays in Southern California averaging double digits, congested ports, overloaded transshipment warehouses, and scarce and expensive trucking being the default position for many shippers, Houston and Savannah are expected to be thriving, no. ‘is this not?
From a sea freight perspective, the belief that these two ports are safety valves may be more ambitious than real. The greater number of the larger ships with the highest calling frequency continue to make their way to Southern California, both for the capacity and for the ability to re-enter Asia more quickly. Despite the stranded crossings and completely disrupted schedules, Southern California still has more overall capacity than any other port in the United States.
Looking at Houston, they’ve reached their bulk capacity – there’s no room for more ships or bigger ships at this point. The full capacity of these Houston-calling ships is pre-booked by major retailers, and the little space left has skyrocketed for two main reasons. First, while carriers can use additional chargers between Asia and the USWC, they do not in the Gulf or beyond. Second, ships calling in Houston are limited by the size of the Panama Canal, whose third passage, completed just five years ago in 2016, can accommodate ships up to around 15,000 TEUs. Big, sure, but considering that carriers operate container ships with a capacity of almost 23,000 TEUs these days, it is not unfair to say that the channel is limited in its capacity to handle. relieve current pressure.
This leaves the importers who normally rely on the east coast unloading ports, adding to the volumes on the west coast, as it’s better to be on the water somewhere than to be in a factory out of nowhere.
From a trucking perspective, everything has to be looked at for its two-way nature. Trucks that come in from eastern California with product or distribution products will have an incentive to return to California for more of the same – and there is a lot “more” to be had. Can the same be said of trucks entering and leaving other ports? Is the traffic to these ports – like Houston – more for local consumption than to distant places?
The grid imbalance we see on domestic 53-foot dry vans is telling for southern and southeastern California compared to southern California. It’s an economic story to them – go where profitability lies. Profitability comes in the locations with the highest rates and the lowest dwell time or delays.
As we move forward into May, a traditional year would be dedicated to back to school and holiday merchandise for the next three to five months. The question on everyone’s mind is when – and even more frighteningly if, the buying of goods shifts from services to services in 2021. When do home renovations and shopping give way to family vacations and to theme park visits or a recovery in spending on children’s sports and extracurricular activities?
Does a fully vaccinated logistics workforce translate into increased speed at choke points? Are people returning to shop in person rather than ordering online, changing the demand to re-fill physical shelves instead of centralized distribution warehouses?
We remain in uncharted waters for the foreseeable future, but continue to watch for signs and clues as to what lies ahead.
Mike Klage is Director of Solutions at TOC Logistics International.