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Today's Feature

 

Dysfunctional west coast docks will induce east coast shift favouring trucks over railways

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THE importance of the ports on the US west coast can hardly be overstated, writes senior analyst Larry Gross, at Bloomington, Indiana's consultancy FTR Transportation Intelligence. In Q3 2014, he said, these ports were responsible for more than 52 per cent of the nation's containerised imports and over 38 per cent of the containerised exports.

How big is the backlog? At its height before the big break in the talks, there were 40 ships anchored off the west coast awaiting berth space at the ports. If we assume an average size for these vessels of 8,000 TEU each that indicates a total of roughly 320,000 TEUs that are floating on the water awaiting handling.

Assuming a typical mix of FEUs and TEUs this is perhaps 215,000 individual containers. And that doesn't count the even more sizeable quantities of units on ships tied up at the docks and piled up in every inch of the terminals. This is probably at least as many as are on the water, so an informed guesstimate would be that perhaps 600,000 to 700,000 TEU, or 400,000 to 500,000 individual containers are awaiting processing and movement.

How long might it take for this backlog to be worked down?

For a rough idea, last year in March 2014, the major US west coast ports (Los Angeles, Long Beach, Oakland, Portland, Seattle and Tacoma) collectively handled a total of 710,000 inbound TEUs. This represents the inbound flow in a normal March. The flow in will undoubtedly be lower this March since most shippers are already diverting every load possible away from the chaos.

Additionally, the late date of the Lunar New Year this year means that March import volumes would be lower than last year in any event. But even if volume declines by 20 per cent, that leaves roughly 570,000 TEU that will probably still hit the ports during the month and that number will ramp up seasonally each month thereafter.

The peak month last year was October for inbound shipments. During that month, the west coast ports handled a total of 872,000 TEU, working flat out. This therefore represents a reasonable topside estimate for how many containers can be processed, and implying an ability to work down the backlog to the tune of 250,000 to 300,000 TEU per month.

So this back-of-the-envelope calculation indicates that it will take eight weeks or more before things begin to approach "normal".

In the near term, we can expect spot rates off the west coast to spike. This will be particularly true for expedited truck as shippers will be desperate to make up for lost time and to deploy inventory on depleted store shelves and into assembly plants as soon as possible.

Conversely, the currently elevated westbound rates will decline as carriers will be seeking every load available to deploy equipment back to the west coast. The normally high intermodal share of this volume will be reduced in light of the need for speed, but this effect will be swamped by the sheer volume increase that will occur.

 

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