The precipitous drop in port volumes at the North American coastal ports is packing a one-two punch for the North American international intermodal sector.
The escalation of canceled sailings is resulting in a significant pile-up of containers at the ports because there haven't been enough vessels available to pick up the containers. Meanwhile, the drop in port volumes is creating a shortage in container availability for export shippers.
"There is an empty container crunch that is limiting the ability of shippers to export their products," said Noel Hacegaba, deputy executive director and chief operating officer for the Port of Long Beach in California.
"On the other hand, the escalation of blank sailings is also resulting in thousands of empty containers piling up in our port," Hacegaba said. He added that the port has partnered with shipping lines to bring empty loaders – as large as 23,000 TEU vessels – to evacuate empty containers from Long Beach and reposition them to Asia.
Long Beach calculates that the number of blank sailings for the first quarter as of last week was 61, nearly double the number the port sees in a typical year, while imports were down 18% in February.
"International intermodal volume from the West Coast ports is the segment to watch for impact from the coronavirus. We have seen a tremendous impact on international intermodal volumes outbound from the ports in Southern California, which are largely tied to imported goods from China," said Mike Baudendistel, FreightWaves market expert for rail, intermodal and equipment.
The latest data point in SONAR shows 40-foot loaded containers at the Port of Los Angeles (ORAIL40L.LAX) starting to recover after a dip in early March. Source: SONAR
Even U.S. East Coast ports, which have been more resilient to the drop in volumes from China as a result of the coronavirus outbreak and the extended factory closures, have seen port volumes fall significantly.
West Coast "ports have been more dramatically impacted by the cancelled sailings from China, but carriers have cancelled sailing to the U.S. [East Coast] and Gulf ports as well, creating some shortage of ship space to carry our agricultural and forest products exports out of those ports," said Peter Friedmann, executive director for the Agriculture Transportation Coalition. He added that the impacts on the East and Gulf Coast ports haven't been as dramatic as those seen on the West Coast.
While empties are piling up at the ports, with some terminals refusing to even take additional empties, according to sources, some export shippers are having a hard time finding empty intermodal containers.
For instance, export shippers in the Midwest are seeing a shortage of refrigerated containers for protein such as meat, pork and dairy, Friedmann said. Some of those shippers have resorted to securing empty reefer containers from New York and New Jersey and repositioning them to the Midwest, according to Friedmann.
"On the coast, the problem is not that they can't get empty containers, it[‘s that they have nowhere to return them. Until China's production of consumer goods for the U.S. market is fully back to pre-COVID [coronavirus] levels, we won't have the inbound ships delivering those consumer goods, and able to carry back to China the stockpiles of containers – both those that are empty, and those containing agriculture and forest products exports," Friedmann said.
A volume comparison of inbound loaded (IRAIL40L.USA) and empty (IRAIL40E.USA) 40-foot containers and outbound loaded (ORAIL40L.USA) and empty 40-foot containers (ORAIL40E.USA) in the U.S. Empty inbound and outbound container volumes are down 27% and 35%, respectively, from the start of the year. Source: SONAR
In Canada, the blank sailings to the western ports of Vancouver and Prince Rupert, coupled with recent rail disruptions related to protests over a fracked gas pipeline in British Columbia, have sharply reduced container availability for some shippers, according to Greg Northey, vice president of corporate affairs for Pulse Canada.
The high number of blank sailings in 2020 has resulted in "an unprecedented amount of lost capacity," Northey said. It "means there are fewer empty containers for our sector to use to export and [it] also means that when there are containers to fill, they are sitting loaded for days and weeks as there are fewer ships to take them overseas," Northey said.
The pulse sector uses transloaders in Vancouver to transfer pulses moved in hopper cars into containers, Northey explained. But transloaders are overwhelmed, with approximately 3,000 loaded containers on their properties in Vancouver, and as a result, there is no shipping capacity available and there is no space left to store them, he said.
"For the pulse sector, the continuing collapse of global container supply chains as a result of COVID-19 is crippling our industry and likely other containerized supply chains, and there is little hope that it will get better any time soon," Northey said.
A volume comparison of inbound loaded (IRAIL40L.CAN) and empty (IRAIL40E.CAN) 40-foot containers and outbound loaded (ORAIL40L.CAN) and empty (ORAIL40E.CAN) 40-foot containers in Canada. Outbound empty and loaded container volumes are down 32% and 40%, respectively, from the start of the year. Source: SONAR
Meanwhile, overall intermodal volumes in the U.S. and Canada fell on a weekly basis last week, and those declines could appear in future weeks as lower port volumes and decreased Chinese manufacturing output related to the coronavirus outbreak in China make their way through the North American supply chain.