How “chaos” in the shipping industry is choking the economy: Planet Money: NPR

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SAN FRANCISCO, CALIFORNIA - MARCH 26: Container ships sit idle in San Francisco Bay just outside the Port of Oakland on March 26, 2021 in San Francisco, California.

Justin Sullivan / Getty Images

Whidbey Island is a lovely place about 30 miles north of Seattle on Puget Sound. Most of the time, the quiet sounds of the waves and the chirping of birds provide an escape from the hustle and bustle of the city. But these days, all is not so serene. Residents complain about the heckling created by the huge container ships anchored off their coasts.

“We’ve never seen them so close before,” Whidbey Islander told a local news station. “We hear the haunting noise at night … It’s a nuisance.” The noise was so loud that the residents complained to the county sheriff’s office about it.

Whidbey Islanders have a front row seat to America’s growing trade deficit, which is hitting records. It is powered by a demand surge for imports, mainly from East Asia. There is so much cargo being shipped from Asia to the United States right now that the ports of Seattle and Tacoma are overflowing with container ships.

“We are seeing a historic increase in the volume of cargo entering our ports,” said Tom Bellerud, director of operations for the Northwest Seaport Alliance, which manages all cargo handling at the ports of Seattle and Tacoma. “The terminals are struggling to keep up with the processing of all the cargo from these ships fast enough.”

On land and at sea, the entire supply chain is struggling to keep up. In the Pacific Northwest, it has become such a festival that the US Coast Guard has redirected boats to anchor off Whidbey Island and other places they usually don’t park. Ships’ crews have to wait days, if not weeks, for the chance to dock in ports and unload their precious cargo.

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It’s the same story along the west coast. In San Francisco Bay, the traffic jam of container ships has become so bad that the US Coast Guard has told them not to enter the bay at all. Robert Blomerth, director of the USCG’s San Francisco Vessel Traffic Service, said last week that there were 16 container ships waiting on the high seas outside the Golden Gate to enter and unload their cargo. He says it’s “completely abnormal”.

When we spoke to Gene Seroka, the Port of Los Angeles chief, he said his port has 19 ships waiting to dock, and they are now waiting, on average, about five days to enter. Normally, they don’t have to wait at all.

Lars Jensen, CEO of Vespucci Maritime, has spent twenty years studying the industry and says what is happening is unprecedented. “The container shipping industry is in a state of chaos that I don’t think it has ever been since its invention,” he says.

The maiden voyage of the first container ship set sail from Newark, New Jersey, in 1956. It can be difficult to understand just how important this innovation was. It was just a big ship carrying containers, literally metal boxes. But these metal crates allowed ships to carry considerably more cargo, and by standardizing shipping practices and using new machinery to handle crates, shippers were able to lower the costs and the time it takes to load, unload and transport that cargo. Credit economists those metal boxes that increase shipping efficiency so much that they have united the modern global economy more than anything else – more than all free trade agreements put together.

Now economists fear that the plumbing provided by these miracle boxes and the ships that carry them may be clogged. It is more difficult for stores to restock their shelves, manufacturers, Car manufacturers, and builders to get the parts they need, and Farmers to export their products. This is an important reason, analysts say, that we are seeing a surge in consumer prices.

How did the expedition turn upside down?

At the start of the pandemic, global trade hit an iceberg and sank into the abyss. The decline of shipping has been so dramatic that American scientists saw a unique opportunity to study what happened to the whales in the absence of a constant deluge of ships. The sound of ships apparently stress them out – as if they are currently stressing the residents of Whidbey Island.

Greater tranquility for whales in the first half of 2020 was the result of shipping companies cancel their trips and moor their ships. Then the economy rebounded and American consumers set off a tidal wave of demand that swept through the shipping industry when they began to change their spending habits. Unable to spend the money to go out, many began to spend their money (and their dunning checks) on manufactured goods – things that come largely from China on container ships.

In the beginning, it wasn’t the ships that were the problem: it was the containers. When the buying frenzy started, Chinese exporters struggled to get their hands on enough empty boxes, many of which were still blocked in the United States because of all the trips canceled at the start of the pandemic. More importantly, it took longer to process the containers here due to all the disruption and inefficiencies brought on by the pandemic. Containers pile up in shipyards, and trains and trucks struggle to get them out fast enough.

“The pandemic has exacerbated long-standing problems with the country’s supply chain, not only in ports but in warehouses, distribution centers, railways and other places that must function properly for longshoremen can move cargo off ships, ”says Cameron Williams. He is a member of the International Longshore and Warehouse Union, which represents dockworkers, primarily on the west coast. Dockworkers have worked tirelessly during the pandemic to deal with the increased volume of cargo, he says, and at least 17 ILWU workers have lost their lives to COVID-19. “We continue to work hard and break records month after month to clear cargo as quickly as the supply chain allows,” said Williams.

Everything has been done to provide voracious consumers and businesses with what they want. The resulting traffic jams at west coast ports mean it takes longer to unload cargo, which in turn lengthens the time it takes for ships to cross the Pacific and recharge.

This congestion was already creating massive delays at both ends of the maritime supply chain, immobilizing large numbers of containers and ships, leading to growing backlogs and shortages. Then, in March 2021, the Never given, one of the largest container ships in the world, got stuck in the Suez Canal in Egypt. While the blockade did not directly affect the Asia-West Coast shipping corridor, it has exacerbated the global shortage of ships and containers by blocking even more at sea.

As if all this was not enough, last month there was a COVID-19 epidemic at the Yantian International Container Terminal in China, which is normally one of the busiest ports in the world. The Chinese government has put in place strict measures to control the epidemic and, as a result, more than 40 container ships were forced to drop anchor and wait. “In terms of the amount of cargo, what’s going on in southern China right now is an even bigger disruption than the Suez Canal incident,” Jensen said.

The effects on the US economy

With such a bogged down shipping capacity, importers and exporters competed for rare containers and vessels and drove up the cost of transportation. The cost of shipping a container from China / East Asia to the West Coast has tripled since 2019, according to the Freightos Baltic Index. Many large importers pay shipping costs through annual contracts, which means they have been somewhat immune to the price hikes, but they are start to feel pain when they renegotiate contracts.

Rising shipping costs and delays rob the economy of what it needs, contributing to shortages and inflation. It’s not just consumers and retailers who are affected: US exporters complain that shipping companies are so desperate to get containers back to China quickly that they are making the return trip across the Pacific without waiting to fill the containers with American-made products. This is bad news for these exporters and for the growing US trade deficit.

As for when it’s going to improve, none of the people we spoke to think it will be anytime soon. The crazy part of it all is that it’s not even considered high season for the shipping industry yet. That typically starts in august, when American stores begin to stock up for the start of the school year and the holidays. Residents of Whidbey Island may have to continue to deal with the nuisance of the gigantic and noisy ships that clutter the horizon for the foreseeable future.

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