Container lines struggle to find space for new services in LA-LB

August 31, 2021

Ocean carriers are finding creative ways to secure additional vessels to meet demand in the booming eastbound trans-Pacific, but they are struggling more than ever to find a home for these vessels at congested US West Coast ports.

In a trade that is dominated by vessels of 10,000 TEU capacity and greater, carriers are pulling ships of 4,000 TEU capacity or less from lower-volume trade lanes and deploying them profitably as extra loaders in the trans-Pacific despite higher per-unit carrying costs.

This is made possible by today’s record freight rates and premium surcharges, a trend that will continue into early 2022, said Dan Smith, principal at the transportation consulting firm Tioga Group. “As long as people are willing to pay these astronomical rates, carriers will be able to find enough ships,” he said.

However, securing berthing space for these ad hoc calls at marine terminals on the West Coast that are already operating at capacity servicing their regular book of business is another story. Some terminal operators say they will accept a few extra loaders, with the understanding that those ships may have to wait a week or longer at anchor until a berth becomes available.

The situation in Los Angeles-Long Beach is especially difficult. “We’re taking ships one at a time, but we’re telling them they’ll have to wait in line. All of the terminals are full, including us,” said Ed DeNike, president of SSA Marine, which operates three terminals in Long Beach.

According to a terminal executive in Los Angeles who asked not to be identified, when a terminal operator agrees to accept an ad hoc vessel call, the ship operator is told up front it will pay the terminal’s public tariff price, which is much higher than what lines with contracts at the facility are paying.

“We tell them they’ll pay our public tariff, and we’ll get them in as soon as we can, but we can’t say when that will be,” the terminal executive said.

Despite these challenges, carriers from other trade lanes continue to announce new extra-loader calls to Los Angeles-Long Beach, and they are gradually transitioning some of those one-off calls into scheduled weekly services.

Shanghai Jin Jiang Shipping (SJJ) became the latest Chinese regional carrier to join the trans-Pacific trade with two 1,713 TEU ships that will be entered next month into the TPX service that China United Lines launched in July as a fortnightly service to Long Beach, according to a report from maritime analyst Alphaliner on Wednesday. With the addition of the SJJ ships, the TPX service will now deploy five vessels with capacities ranging from 1,732 to 2,741 TEU. China United Lines is also preparing to launch a second China service from Xiamen and Nansha to Long Beach, the maritime analyst said.

Singapore-based Transfar Shipping is also expected to start offering some trans-Pacific sailings in October, although there are no further details at this time, according to Alphaliner.

The biggest challenge that these new entrants in the trans-Pacific face is that West Coast terminal operators will not sign contracts with them for a scheduled weekly service. Most terminal operators said that after 13 consecutive months of record and near-record import volumes from Asia, those slots are full.

“They want us to sign contracts with them. I don’t have the space to sign contracts with them,” DeNike said regarding the SSA terminals in Long Beach.

According to the Marine Exchange of Southern California, there were 29 container ships at berth and 38 at anchor awaiting berthing space at the 12 terminals in Los Angeles-Long Beach on Tuesday. The record for container ships at berth, set at 40 in February, was reached again one day last week. According to data from the Port of Los Angeles Signal platform, the average length of stay at anchorage is 7.8 days. Prior to the COVID-19 pandemic, most vessels would proceed directly to berth without having to stop at anchor.

Terminal operators attribute congestion and vessels being forced to wait at anchor to several factors, including poor on-time vessel performance in the trans-Pacific, warehouses filled to capacity, chassis shortages, and the failure or refusal of retailers to pull their containers from the terminals even though the retailers are paying tens of thousands of dollars in demurrage (storage) fees.

A second terminal operator who asked to remain anonymous said excessive container dwell times at his facility are so extensive that he is turning down extra-loader vessels even from long-running carrier partners. “We’re leaving about 5,000 lifts a week on the ships because of the very high dwell times,” he said.

Port managers in Oakland and the Northwest Seaport Alliance (NWSA) of Seattle and Tacoma say they are routinely receiving inquiries for terminal space from vessel operators and non-vessel-operating common carriers that have booked vessels for large retailers.

Bryan Brandes, maritime director at the Port of Oakland, said last week that he anticipated carriers would soon reinstate calls to Oakland that had been suspended since port congestion led to vessels being diverted away from Southern California in the spring. Although Seattle’s terminals are operating at capacity and Tacoma’s terminals were nearing capacity, Tacoma can accept additional ad hoc calls in designated receiving windows, said Thomas Bellerud, NWSA’s chief operating officer.

Given that almost all the vessels available in the global fleet are 4,000 TEU capacity or less, the per-unit cost of operating ad hoc calls to East Coast ports can be prohibitive, even at today’s high freight rates, because of the longer transit times from Asia.

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Source: Journal of Commerce

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