As East Coast ports take more share of China trade, expect more bottlenecks for supply chain

  • One in five container ships currently arrive on time on the East Coast, according to Sea-Intelligence.
  • East Coast vessel volumes are up because of fears of a West Coast labor strike, and transit time is increasing on the East Coast as more vessels are anchored offshore.
  • As more vessels pressure East Coast ports, West Coast vessel schedule reliability reached its highest level in over a year.

Port productivity remains a huge hurdle for the U.S. supply chain as billions of dollars of products are at anchor or landlocked, and a shift to use of East Coast ports over West Coast ports creates new pressures.

In the past three months, vessel capacity between the Far East and the U.S. East Coast has risen by 18.9% year on year, according to ocean and air freight research firm Xeneta. While the West Coast continues to have the lead in market share of Far East containers at 59.8%, it is continuing to lose more capacity to the East Coast as logistic managers move away from the West Coast out of fear of a labor strike.

In the last three months, container capacity also has dropped on the West Coast, by 1.7%. This has an impact on trucking and rail companies that serve the West Coast because there is less container volume to move. Rail company BNSF, owned by Berkshire Hathaway, and Union Pacific, specifically serve the West Coast ports. On the flip side, it is a boom in rail and truck service on the East Coast with the increase in volume. Norfolk Southern and CSX are the rail companies that serve the East coast ports. Unlike rail, trucking companies have the ability to serve both coasts.

“As more vessels and cargo heads east, there’s been an 11.9% increase in volumes so far this year, with a 7.3% year-on-year increase in May alone,” said Peter Sand, chief shipping for Xeneta. “This pressurizes capacity, and there’s a price to pay in terms of reliability. So, in a way, the East Coast becomes a victim of its own success and the West has the breathing space to recover somewhat.”

The lack of breathing space, and delay in container delivery, can be tracked through a vessel’s total transit time — the time it takes a vessel to travel from its port of origin to its docking at the destination port.

Time is money, and a vessel or container at rest takes both out of the supply chain for faster use. It is also one of the drivers of rising container prices.

According to Project44, the average transit time from China to the West Coast pre-pandemic was under 20 days to 25 days on the West Coast; and 38 days on the East Coast.

“For the West Coast, travel time now has dropped back down to 24 days,” said Josh Brazil, vice president of supply chain insights for Project44. “So we’re in a good spot right now on the West Coast, but again, switching to the East Coast, those transit times have risen. The increased transit time tells us there are more delays at the port because of congestion. Unfortunately, with more vessels calling the East Coast in the coming months, we expect bottlenecks to continue.”

The CNBC Supply Chain Heat Map has been tracking the increased flow of trade away from the West Coast to the East Coast and the congestion it is creating.

Waiting times in Savannah have increased for 10 consecutive weeks, according to Alex Charvalias, supply chain in-transit visibility lead at MarineTraffic. That’s up from a single waiting day in May 2022 to over 13 days currently. “With no signs of ease in the following weeks, Charvalias said.

Sea-Intelligence is reporting that East Coast congestion has now deteriorated to the point where less than one in five container ships currently arrive on time (18.7%).

“The ports in Europe and in China are larger and automated so they are able to deal with disruptions better,” said Brazil. “Those ports have driverless, chassis trucks to pick up those boxes, and it really does speed up the process to get vessels unloaded and loaded,” he said.

In China, a vessel may get processed in less than a day, according to Brazil. In Europe, it may take two days. But in the U.S., for the Port of Los Angeles and other ports, it may take four to six days.

Automation is one of the issues in the ongoing contract negotiations between West Coast ports and the labor union for dock workers.

“So there really is kind of a big difference there in terms of what automation can do. Automation is a contentious subject because there are jobs associated with it. This will be a subject of contention for a long time to come,” Brazil said.

The CNBC Supply Chain Heat Map data providers are artificial intelligence and predictive analytics company Everstream Analytics; global freight booking platform Freightos, creator of the Freightos Baltic Dry Index; logistics provider OL USA; supply chain intelligence platform FreightWaves; supply chain platform Blume Global; third-party logistics provider Orient Star Group; marine analytics firm MarineTraffic; maritime visibility data company Project44; maritime transport data company MDS Transmodal UK; ocean and air freight rate benchmarking and market analytics platform Xeneta; leading provider of research and analysis Sea-Intelligence ApS; Crane Worldwide Logistics; and air, DHL Global Forwarding; freight logistics provider Seko Logistics; and Planet,  provider of global, daily satellite imagery and geospatial solutions.

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