By Michael D. White, author and freelance writer
In 2019, some $4.2 trillion worth of goods of every imaginable description were exported and imported through the nation’s 360 sea, air, and land ports.
From Anchorage, Alaska and Jacksonville, Florida to San Diego, California, and Buffalo, New York the goods flowed by truck and rail between the U.S. and its Top Two trading partners, Canada and Mexico.
China held the No. 3 ranking, partnering with the U.S. to generate more than $472 billion in combined import-export trade—most of that moving through ports on the U.S. West Coast, and most of that through the Ports of Los Angeles and Long Beach, the two busiest container ports in the U.S.
And that’s where our story begins.
Sea: Congestion Reigns
Currently, about 90 percent of the world’s goods are transported by sea with more than 75 percent of that volume stowed in containers.
Staggering as that figure is, however, for the bulk of 2020 and into this year, the COVID-19 pandemic has created knots in the global supply chain that have impacted all freight transport modes, from rail to air cargo, and, at best, will take months to unravel.
In May of 2020, the AAPA reported that the volume of containerized cargo moving through U.S. ports had plummeted approximately 20-25 percent from the same time period in 2019.
At the same time, though, all eyes are on the Port of Los Angeles and Long Beach—which are handling record volumes of container cargo and, while impressive on the surface, are, counter-intuitively, resulting in unprecedented congestion at both megaports.
Speaking at a January 2021 State of the Port event, Port of Los Angeles Executive Director Gene Seroka stated that during the previous year, the port’s container business “was the most erratic we have seen to date. By May 2020, our volume had plunged nearly 19 percent.”
“During the second half of the year, American consumer demand created a pandemic-induced purchasing surge that our economy has never seen before,” he said. “Our second-half volume increased nearly 50 percent. The week before Christmas, we handled 94 percent more traffic than the same week in 2019.”
During the 2020 calendar year, he said the port processed 9.2 million twenty-foot equivalent units (TEUs) “making 2020 the fourth-busiest year in the port’s history in terms of volume.”
The pandemic, he said, created a surge in container traffic in which “everybody in the industry took a hit, from ocean carriers all the way to your local package delivery vans. All of us were stretched. No one escaped criticism, and we are still moving extraordinary levels of cargo.”
There is little sign that the congestion at the two Southern California ports – on average, 30 ships at anchor in San Pedro Bay per day since January – will be easing anytime soon as some industry experts predict that it could take up to six months for the backlog at the two ports clears.
According to the Marine Exchange of Southern California, on a single one of the days of the week that Seroka gave his address, 32 container ships were anchored in the Bay awaiting berth space at both mega-ports.
In a February 4, 2021, letter to the company’s shareholders, John Foley, CEO of fitness equipment provider Peloton, stated that the situation “has added significant delays to all sorts of goods coming into U.S. ports, including Peloton products…these unpredictable delays have resulted in painful delivery reschedules for many people as Peloton bikes, treads, and accessories have been held at the port [Los Angeles] for upwards of five times longer than usual.”
On March 23, 2021, on the other side of the world, to add insult to injury, the containership Ever Given, bound from Malaysia to the Port of Rotterdam with more than 18,000 containers aboard, went aground in the Suez Canal, blocking the critical waterway for six days.
The incident – involving a ship almost as long as the Empire State Building is tall – caused a massive backlog of ships with as many as 55 vessels waiting to transit the Canal.
The core port-related issue is that the Ever Given grounding, in effect, didn’t block the movement of cargo as much as it caused 200-plus ships carrying billions of dollars worth of goods in-transit for U.S. East Coast and Gulf Coast ports –from New York/New Jersey to Galveston, Texas – to be diverted from their regular routes, thus changing their arrival dates, causing more kinks in the global supply chain, and impacting shippers nationwide.
The impact of the Ever Given incident will initially be felt for months as the volume of goods destined for inland markets throughout the country that moves through U.S. East and Gulf ports by truck and rail will drop as ships continue to wait to transit through the Suez “pinch point” or detour around South Africa’s Cape of Good Hope, say analysts.
The initial drop in cargo volume will, they say, be followed by a surge that could seriously affect those ports’ ability to handle the expected increase in container flow.
“Not only will the goods aboard the Ever Given be severely delayed on their journey, but the hundreds of other ships are also affected. The damage done to the global supply chain will be significant,” says Guy Platten, secretary general of the London-headquartered International Chamber of Shipping. “The world relies on the shipping sector to keep all of us supplied and the incident in the Suez Canal has shone a spotlight on the delicate nature of these global supply chains.”
But, there was one ray of sunshine that poked through the clouds.
In March, the FY2021 Omnibus Appropriations package and the National Defense Authorization Act (NDAA) were both passed by Congress.
Several components of both contain elements long-sought after by the maritime industry including the first-ever draw-downs from the $9.3 billion balance in the Harbor Maintenance Trust Fund (HMTF).
Within the NDAA is the authorization for the Maritime Transportation System Emergency Relief Program (MTSERP), which is the first-of-its-kind mechanism available to ports for getting federal funds appropriated and distributed to supply `direct relief following disasters, including pandemics such as COVID-19.
Also included are $2.6 billion for coastal navigation work; $1.68 billion for the Harbor Maintenance Trust Fund; and $230 million for the Port Infrastructure Development Program ($205 million of which is earmarked for smaller U.S. coastal or Great Lakes seaports).
In addition, $100 million has been set aside for the Port Security Grant Program; $104 million for Customs and Border protection; $90 million for Diesel Emissions Reduction Programs; and $32 million for the National Estuary Program.
Air: Flying High
A year after the onset of the COVID-19 pandemic destroyed demand for air travel, cargo remains the sole bright spot, according to Bloomberg Business.
The congestion plaguing the nation’s seaports has some companies foregoing maritime shipping in favor of airfreight to get popular or seasonal items on store shelves faster.
Air rates are historically higher than shipping via ocean freight, but they’ve been dropping in recent months, making the movement of goods by air a more attractive option as ocean carriage has become a major kink in global supply chains.
Air cargo traffic continued to improve on all key trade lanes in the three months to January. But the Asia-North America route has grown by 14.1 percent year-on-year, a noticeable feat driven by consumers in North America, who are utilizing eCommerce at an unprecedented rate.
Growth in cargo throughput continued to improve at an airport level.
Despite disruptions and lack of capacity, every key U.S. air cargo hub – namely Memphis, Anchorage, Louisville, Los Angeles, JFK, Cincinnati, and Indianapolis, with the exception of Miami – saw their cargo volumes grow by double digits in 2020.
With fewer passenger planes in the air, there’s less room for freight that’s normally transported in their holds. That’s driven up demand for dedicated cargo jets to help handle the boom driven by online shopping, vaccine distribution and just-in-time supply chains.
Pre-pandemic, 60 percent of all international air-cargo capacity was in the bellies of passenger aircraft, according to industry group IATA, while 2020 capacity shrank by almost a quarter.
Carriers have even resorted to temporarily converting some passenger jets to freighters, pulling out seats to carry goods inside their main compartments.
IAI North America, the New Jersey-based subsidiary of Israel Aerospace Industries Ltd., is reportedly fully booked until 2022 for so-called passenger-to-freighter conversions with the company expected to convert about 90 aircraft from passenger to full-cargo capacity in both 2021 and 2022.
U.S.-based United Parcel Service Inc. expects 2021 to be another strong 12 months after posting record sales last year. Amazon.com Inc. is rapidly expanding its fleet of planes, and recently announced it would buy 11 used Boeing 767-300 jets.
The planned purchase is the first time the mammoth online retailer will acquire, rather than lease, aircraft for its rapidly expanding air cargo operations.
With passenger revenues declining due to the COVID-19, over the past ten months, Delta Airlines has focused on its cargo-only flights, operating daily flights connecting Seoul-Inchon with Detroit, four times a week flights on the Inchon-Los Angeles route, and three a week between Inchon and Atlanta.
The decision is aimed at keeping the supply chain of medical equipment like surgical masks, gloves, gowns and other protective gear operative between the United States and Asia.
The carrier operates its Boeing 777-200ER aircraft on the Atlanta and Los Angeles flights, while Airbus A350-900 aircraft ply the cargo route linking Inchon and Detroit.
Both jets have the capacity to carry up to 42 tons of cargo on international routes. Per the schedule, the cargo on arrival in Atlanta, Detroit or Los Angeles will be transferred to domestic passenger flights so that they can be shipped to other destinations in the country.
In an interesting multi-modal twist, ocean container line CMA CGM recently inaugurated a new in-house cargo operation to serve two routes connecting its home base in Liege, Belgium, with New York’s JFK International Airport and Hartsfield International in Atlanta.
The unique service came just a few weeks after the new carrier unveiled its initial service linking Liege and Chicago.
The ocean carrier’s new air freight division operates five flights per week between Liege and Chicago O’Hare Airport, once per week Liege-JFK, and four times per week from Liege to Atlanta via JFK.
French-owned CMA CGM has added two more Airbus A330-200 freighters to its fleet, doubling the number of aircraft, which are operated for the company by Air Belgium, a tourist airline. The air freighters were previously operated by Qatar Cargo.
CEVA Logistics, the carrier’s huge logistics arm is a primary customer of the service and has priority access to flights, while Groupe ECS is serving as its general sales agent to help market its capacity, handle bookings and manage shipment processing for non-CEVA customers.
Trans-border freight between the U.S. and North American countries (Canada and Mexico) in January 2021 was valued at $94.3 billion moved primarily by truck and rail, down 2.6 percent compared to December 2020 and down 2.9 percent compared to January 2020, according to the latest statistics compiled by the Bureau of Transportation Statistics (BTS).
Trucks moved $61.1 billion of freight, up 0.9 percent compared to December 2020, up 0.1 percent compared to January 2020, while rail carriers hauled $13.9 billion of freight, down 1.9 percent compared to December 2020, up 3.7 percent compared to January 2020.
The Top 3 Busiest Truck Border Ports – Laredo, Texas; Detroit, Michigan; and Yselta (El Paso), Texas – which combined handled 45.3 percent of total trans-border truck freight, almost 48 percent of which was made up of computers and peripherals, electrical machinery, and motor vehicles and parts.
Last January, rail carriers hauled almost $14 billion in freight across the nation’s northern and southern borders, or 14.7 percent of all trans-border freight, says the BTS.
In December 2020, according to the latest Bureau of Transportation Statistics (BTS) data, cross-border freight moving between Canada and the U.S. increased year-to-year for the first time since the pandemic began causing disruptions in March 2020, but trucking took a hit compared to the previous month.
Compared to December 2019, cross-border freight was up 0.4 percent after a 3.2 percent decrease in November and a 4.7 percent decline in October, according to the BTS.
That marked the first year-to-year increase since last February, just before the nation began implementing lockdowns due to the pandemic.
In January 2021, more than 58 percent of U.S.-Canada cross-border freight was moved by trucks, followed by rail at more than 16 percent.
To the south, in last January, more than $48 billion of freight moved in and out of Mexico, with trucks hauling more than 71 percent of the cargo.
The leading inland port for both rail and truck traffic is the Port of Laredo, Texas, which consistently holds the Top Spot and the primary inland port along the U.S.-Mexico border and ranks fourth in the nation with $205.88 billion in imports and exports in 2020, according to U.S. Census Bureau data.
In January 2021 alone, Laredo handled almost $15 billion in cross-border truck traffic, while it saw $3.5 billion worth of freight moved through its Union Pacific and Kansas City Southern intermodal yards.
In 2018, $408 billion – or some 55.2 percent – of Texas’ total international trade traveled across the state’s border crossings with Mexico.
Of that amount, the Laredo port of entry accounted for 57.6 percent of land port trade, or about $234.7 billion. This is an increase of 193 percent in the 15 years since 2003, when the Port of Laredo accounted for $80.1 billion in land port trade.
Mexico accounts for 97.5 percent of the Laredo port of entry’s total trade. The second-largest trading partner using this port is China, which only accounts for one percent of the trade at this port.
The top products imported through the Port of Laredo are vehicles, machinery and electronics; the top products exported are machinery, electronics, vehicles and plastics moving to more than 60 countries around the world.
Union Pacific provides intermodal service to within eight miles of most Laredo-area industrial parks, as well as service to Dallas and the Midwest, while the Kansas City Southern interchanges with BNSF Railroad and Union Pacific Railroad, and owns the Laredo International Railroad Bridge and Kansas Southern de Mexico (KCSM).
KCSM has interchange service at Laredo and Brownsville, Texas. KCSM serves the ports of Veracruz, Tampico, Lazaro Cardenas, Bulkmatic Transload Service at Monterrey, Mexico and will service a trans-loading center in Toluca.
In 2020, 238,477 rail cars crossed through the Port of Laredo from Mexico.
In March, the Canadian Pacific Railway made public its proposed plan to acquire the Kansas City Southern in a deal that analysts say could be worth as much as a reported $29 billion.
If the proposed merger clears all the regulatory hurdles, the merger would result in a rail network of more than 20,000 miles of track linking manufacturing and agricultural points spanning Canada from Vancouver, B.C., to St. John, New Brunswick.
That vast system would connect the U.S. Midwest, its Great Lakes region, with U.S. and Mexican Gulf Coast deep-water ports from Mobile, Alabama to Vera Cruz; and generating total annual revenues of approximately $8.7 billion.
The deal between the two Class I rail carriers is pending initial approval from the Surface Transportation Board (STB), with analysts saying the agency’s review of the proposed merger could be completed by the middle of next year.
According to the agency, the proposed merger is “significant” and, “under the Board’s statutes and regulations, this proposed transaction would be classified as ‘major’ and would be the first major transaction to seek Board approval in more than two decades.”
Bio: Michael D. White is a published author with four non-fiction books and well more than 1,700 by-lined articles on international transportation and trade to his credit.
During his 35 year career as a journalist, White has served in positions from contributor and reporter to managing editor for a number of publications including Global Trade Magazine, the Los Angeles Daily Commercial News, Pacific Shipper, the Los Angeles Business Journal, International Business Magazine, the Long Beach Press-Telegram, Los Angeles Daily News, Pacific Traffic Magazine, and World Trade Magazine.
He has also served as editor of the CalTrade Report and Pacific Coast Trade websites, North America Public and Media Relations Manager for Mitsui O.S.K. Lines, and as a consultant to Pace University’s World Trade Institute and the Austrian Trade Commission.
A veteran of the United States Coast Guard, White has traveled in both Japan and China, and earned a degree in journalism from California State University and a Certificate in International Business from the Japanese Ministry of Trade & Industry’s International Institute for Studies & Training in Tokyo.