North America Container Ship Traffic Jam Tightens, Threatening to Push Inflation Higher
North America Container Ship Traffic Jam Tightens, Threatening to Push Inflation Higher

By Naveen Athrappully

Port congestion in North America worsened in late July compared with a month ago, with traffic having shifted from the West Coast to the East Coast.

On July 28, there were 153 ships waiting offshore at various ports across North America, a significant jump from 92 vessels on June 10, according to data by American Shipper. The previous seven weeks saw the North American container ship queue jump by 66 percent. The rising congestion has triggered worries about a potential spike in shipping rates, which would push up decades-high consumer inflation.

The Savannah, Georgia, port accounted for 43 of the 153 ships, followed by 26 in Los Angeles/Long Beach, 24 ships in Houston, 18 vessels in New York/New Jersey, 17 in Vancouver, British Columbia, 15 in Oakland, and 10 ships at other ports.

The port congestion has halted falling spot shipping rates. Shipping rates for the China to East Coast route, for example, were hovering around the $10,000 level in late July, while the Europe to North America East Coast rate had jumped by 2 percent, to exceed $8,400.

Though the rates are far from the $25,000 level seen during the height of the container congestion months ago, they indicate an inflationary pressure on supply chains, which can potentially push up prices of commodities and consumer products even higher.

In an interview with American Shipper, Alan Baer, CEO of OL USA, said that the delays in U.S. ports are forcing vessels to return to Asia “out of position to fill their next scheduled inbound sailing.”

“This will lead to a reduction of available capacity due to increased blank sailings, and ultimately higher transportation costs. Reduced volume may initially help to mute the upward price pressure; however, if we see volume increase, the availability of space will tighten quickly,” Baer said.

Eastward Shift

Port congestion had earlier peaked in North America during the months of January and February, when there were nearly 150 ships waiting at various ports, with two-thirds in the queue at the Los Angeles/Long Beach ports on the West Coast.

According to July 28 data, the majority of the 153 ships were waiting at ports in the East and Gulf coasts. While there were 59 ships on the West Coast, accounting for 38 percent of the total vessels, the East and Gulf Coast ports accounted for the remaining 94 ships, or 68 percent.

The recent McCown Report by Blue Alpha Capital points out that U.S. port congestion has transformed from a phenomenon mostly affecting the West Coast to something affecting all coasts. The eastward shift began in June.

Growth in port congestion on the East Coast is attributed partly to shipping lines looking to avoid delays at the Los Angeles/Long Beach ports and opting for East Coast ports, the report said.

Moreover, West Coast labor contracts with the International Longshore and Warehouse Union, which covered 22,000 dockworkers, expired at the beginning of July. This also contributed to the eastward shift due to worries about labor disruption in the West Coast ports.

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