MNI INTERVIEW: U.S. Port Backlog Seen Dragging Into Next Year

Harbor Trucking Association CEO Matt Schrap told MNI U.S. ports are seeing little sign of backlogs easing and probably won't until 2023, keeping price pressures high as relentless U.S. consumer demand persists.

Commenting on the record surge in retail goods processed through the West Coast ports at the end of last year, Schrap said port operators are still attempting to clear out the holiday backlog. "We were able to respond for the holidays and now we're kind of still just digging out," he said. "I feel like we're never going to really be able to catch up."

Omicron has dashed hopes for a rapid return to normalcy in bungled global supply chains, a key source of the elevated inflation that has forced the Federal Reserve to rapidly become more hawkish.

"Ideally, we would be already feeling some relief before the next holiday rush, but I don't think 2023 is unrealistic," he said. "With the Omicron variant now impacting gang availability and with the same type of challenges for container returns, we just haven't seen as much of a dip."

"The queuing process has helped meter these vessels in," he said. "But there appears to be over 90 ships on their way here. I don't envision us having some robust ability to dig out from this backlog that we're in right now because the ships keep coming and it makes it challenging."

CHASSIS TROUBLE

While a transportation driver shortage is systemic, the main challenge has been the inability to use chassis and to return empty containers at ports, said Schrap, who leads a trade association representing intermodal drayage carriers serving America’s west coast ports.

"Our issues that we deal with and that we have been dealing with for some time now really centered around empty containers and the subsequent restrictions that exist preventing the return of particular types of various empty containers, whether it is sizes, colors, etc., back into the terminals in Long Beach," he said.

"Marine terminals are trying to do everything they can but there's space constraints, allocation requirements, challenges with gate hours," he said. "If I don't have the opportunity to return an empty [container] then it makes it difficult to pick up in loaded import just primarily because I need this chassis freed up. Without the chassis then we can't move the import off the dock."

Downplaying prospects that price pressures are moderating, Schrap said "spot rates are high and shippers are willing to pay premiums for service. We're just not seeing a ton of relief."

U.S. inflation surged 7% in the year to December, while the Fed's preferred PCE measured jumped 5.7% in the year to November.

Omicron has also increased near-term uncertainty in the Asia Pacific region threatening supply chains and has pushed up shipping and air cargo rates ahead of the Lunar New Year, China’s largest holiday when hundreds of millions of people traditionally travel back to their home towns. Some have said a targeted zero-Covid policy should limit the economic impact. (See: MNI INTERVIEW: China's Targeted Zero-Covid Gives Econ Headroom)