Seatainer Logjam - Catalyst for Buy American ?
Getting containers into and out of the harbors is severely constricting the supply chain. If the logjam does not break up, it will force sourcing from USMCA countries.
While most ports are affected, the worst case is Los Angeles. This synopsis will delve into the causes chiefly for the port of Los Angeles and how it could result in more domestic sourcing of PPE if the backlog is not cleared. This situation is different from the relatively brief backup in 2014 - 2015.
Ships Parked Off Coast Of Long Beach: Biggest Maritime Traffic Jam In Years
" Ships at anchor are outpacing ships at berth " - Kipp Loutitt, director of Maritime Exchange. Despite a slowdown at the beginning of 2020 as the pandemic hit, the Port of Long Beach last year saw its busiest year on record, moving more than 8.1 million cargo container units, up 6.3% from 2019.
Why are ships sitting offshore for so long?
Long Beach, the #2 busiest U S port, sees a "boatload"of activity during peak season. According to Greg Lehman, executive director of the Port of Long Beach, the combination of record cargo volumes and several other factors has produced "a perfect storm".
Why is there a perfect storm?
Factor #1: COVID
The ongoing COVID-19 global pandemic has had two effects. Consumers have shifted to buying more goods than services ( "e-commerce demand " ). There are fewer workers which involves COVID infections among dockworkers. The International Longshore and Warehouse Union (ILWU) reported 694 of its members had tested positive as of Jan. 17. By Jan. 25, the number had jumped to 803 by February 4th the number jumped to 1068.
Local and state officials were among those who have sounded the alarm at the prospect of not having enough healthy port workers available to load and unload the ships that export American products and import medical supplies necessary to fight the global pandemic.
State Senator Lena Gonzalez, State Assembly member Patrick O’Donnell, Congressman Alan Lowenthal, Los Angeles Mayor Eric Garcetti, Long Beach Mayor Robert Garcia, Los Angeles Councilmember Joe Buscaino, and Long Beach Councilmember Cindy Allen wrote to state officials on Jan. 12: “As we continue to weather the current COVID-19 surge, especially in Southern California, port workers contracting COVID-19 could have disastrous consequences for the movement of goods, food, and medical supplies that Californians are depending upon in this time of crisis. This includes especially critical pandemic response goods such as personal protective equipment (PPE), sanitizer, medical equipment, and more. Moreover, emergency regulations recently promulgated by California’s Occupational Safety and Health Standards Board could further exacerbate constraints on critical supply chains if workers fall ill by requiring continuous testing of all employees and taking exposed individuals out of the workforce.”
Longshore workers still do not have elevated priority in getting the vaccine. If workers do not get essential status with inherent priority for COVID vaccine, a strike is a real possibliity.
" Big ships " ( think Airbus 380's of the seas ) which are nearly three times the size of the average container ship. The longer they wait, the longer the ships have to wait to unload their cargo. This year the number of vessels at anchor this year has been over 30 contrasted to the relatively brief backup in 2015 when the average was 28. Without getting too far into the weeds of statistics, suffice to say ships were much smaller back then.
For a short term fix, ocean freight companies have purchased cargo airplanes. Whether or not the situation in Long Beach is a driver is anybody's guess. There is enough margin in some items distributors can afford the premium air freight. For example, a body bag that retails for $19 costs about $ 1.50 to $ 2.00 from China. The US government last year almost bought several planeloads of body bags. In their wisdom at the last second they decided body bags were not essential and opted for ocean freight.
Longer term, many ports such as Savannah, GA are undergoing massive expansions. If you want to watch a video instead, click here. The conventional wisdom is that normalcy could return between May and June.
This is very bad news for both consumers and volume buyers who have been conditioned to artificially cheap Chinese merchandise. Wal Mart talks a good game of buying American. Talk is cheap. Time will tell if the volume buyers were just looking for safety valve US suppliers.
Specific to PPE, if cheap masks and gowns are not available buyers of PPE will have to walk the walk and pay up for USMCA manufactured goods. Our customers who manufacture OR kits had many requests from hospitals to develop American made masks, gowns and body bags even if the price is higher than China. We took the requests seriously, allocated a lot of resources and have three products ready to go. We hope we put our chips on the right square.