Normalcy — at least what passes for normalcy in 2020 and 2021 — appeared to be slowly returning to trucking lanes outside the Los Angeles area after months of supply chain congestion. The number of ships off the ports of Los Angeles and Long Beach in California had declined in late March from a peak in February.
As longshoremen and dockers unloaded containers from ships and trucks or trains headed for warehouses, TL rates fell steadily, according to Dean Croke, principal analyst at DAT. On average, spot TL prices from Los Angeles or Ontario, Calif., fell 7 cents for the week ended March 21 to $2.84 per mile, Croke said.
“It looked like they were starting to catch up,” Croke said.
However, the latest numbers show that imports show no signs of a long-term decline, signaling high spot prices and limited capacity for the truck market.
For the week ending March 28, Los Angeles and Ontario re-entered DAT’s top 10 for loading volume, “as import volumes continue to reach record levels,” Croke said. “After declining for most of March, outbound cargo post volumes were up 18% week-over-week in Los Angeles and 7% week-over-week in Ontario.”
Croke said the weekly capacity from the ports, generally limited, depended on which exit lane was being used the most by trucks. Capacity fell in Los Angeles, with rates falling 1 cent per mile to $2.81 per mile for the week ended March 28. In Ontario, capacity was limited and pushed rates up 2 cents per mile to $2.90 per mile, Croke said.
More ships are at anchor, waiting their turn to dock
Number of vessels
Complicating the picture of port congestion is the story of the Ever Given, a huge container ship that took stuck in the Suez Canal on March 23. The ship remained there for days, finally evacuating on Monday. Croke said that before Ever Given was released, it was too early to tell whether the fallout from a Suez Canal standoff would affect US spot TL rates.
Congestion at California ports, combined with growing e-commerce demand, means U.S. retailers’ efforts to replenish inventory could stretch again into the summer and beyond, Croke said. And the only way stocks can be replenished is if shippers engage in the spot TL market, and that could mean high rates for many weeks.
Far away from the woes of TP
A year ago, it was toilet paper and other household items that the trucking industry tried to deliver to consumers. The initial panic market of the US coronavirus saga sent TL rates soaring for a few weeks, before rates collapsed.
But U.S. inventories were low in mid-2020. The pandemic, once feared as an economy killer, kept millions of people at home for much of 2020. People saw the need to fix up their homes or apartments and also make lifestyle changes. This led to more online shopping, which further reduced inventory levels.
Spot prices have risen slowly since May as shippers and retailers realized they had empty warehouse space. E-commerce increased and TL rates increased.
Today, with California’s ports congested, it’s not toilet paper or personal protective equipment that’s helping to ease the shortage. They were delayed off the coast of the Golden State Pelotonssports, semiconductorspetrochemicals — a mix of consumer and industrial needs that are likely to keep spot prices high and truckers busy.
Interest rates maintain their momentum
National rates for dry trucks
Restocking retailers and shippers will have to order trucks in the TL spot market to accommodate surges in imports at California ports at a time when capacity was already tight and driver shortages had already devastated the industry.
“It’s going to keep capacity tight and keep interest rates high,” Croke said. “I think it’s a big thing for trucks.”
Most of the movement out of ports is drayage, or short distance, Croke said, with only a small fraction long distance. The No. 1 outbound lane is north, in Stockton, Calif., Croke said, accounting for 9 percent of all DAT’s U.S. cargo volumes. Stockton is a strong warehouse market as a result of its proximity to ports, he said. From Stockton, loads are placed at points north, west and east.
Prices from Los Angeles to Stockton are as low as $3.31 per mile now. In February, the rate was $3.09 per mile. A year ago, the rate was $2.18 per mile.
Another major port cargo destination is Dallas. Spot rates out of Los Angeles are $2.85 per mile versus $1.24 a year ago, Croke said.
Rates are rising in LA’s outbound lanes
Dry van spot prices
But demand is mostly one-way. The price from Stockton to Los Angeles is $1.36 a mile, Croke said, up from $1.47 a mile in February. Less volume is returning to ports, in part because U.S. exports are declining and in part because there is global lack of containers.
Still, higher outbound rates are here for a while, Croke said, as congestion keeps upward pressure on interest rates.
“We could see this happening for the next three to four months,” Croke said.
Big ports, big problems
The Port of Los Angeles had its busiest February in its 114-year history, with a 47 percent increase in TEUs year-over-year, said Gene Seroka, executive director of the Port of Los Angeles, in a March 16 update to the public. It was also the seventh consecutive month of year-over-year increases, Seroka said.
“The consumer market has not given up,” Seroka said during the briefing. “The National Retail Federation projects that sales among its members will increase in 2021 between 6.5% and 8.2% in 2020.”
The Ports of Long Beach and Los Angeles handle the lion’s share of incoming cargo from Asia, with 2 billion square feet of transshipment space in Southern California, according to Ken Duncan, managing director of commercial operations at the Port of Long Beach. Long Beach has six container terminals and Los Angeles has seven.
“It will keep capacity tight and keep interest rates high.”
Dean Kroc
Principal Analyst at DAT
Demand for port services also means bigger problems than smaller ports for stakeholders who interact with the port, including trucking companies.
Once in port, a container ship takes five to six days to unload. East Coast ports don’t see that kind of unloading time because ships often make multiple port calls, Duncan said.
Another known headache — chassis management — was initially a problem during the ramp-up, but has now subsided, Duncan said.
Ports can only accommodate so many dump trucks at the terminals. And ports are also enforcing social distancing, causing dock work to slow, according to Josh Brazil, vice president of ocean analysis for project44.
“It’s never been like this before,” Brazil said. “They’re not able to get enough equipment to handle this.”
And when the two ports take a hit, the supply chain can go cold. Delays are piling up. Croke said that when ships are anchored away from port and delayed for up to 21 days, intermodal agents will miss their window to move the cargo. That drives the shipper into the TL spot market, Croke said.
However, it was not the daily problems at the ports that caused the congestion and increased spot rates. Rather, it was rising imports, a recovering economy and a familiar national headache — the driver shortage — that all contributed to the bottleneck and booming interest rates, Croke said.
Referring to the driver shortage, Croke said capacity has not kept up with demand, and this is particularly true at ports.
The mix of issues came together in the two ports, surprising analysts.
“We’ve almost never seen a bottleneck like this before,” said Tim Denoyer, senior analyst and vice president of trucking for ACT Research.