Alejandra Salgado May 9, 2020
The issue began with port congestion and warehouses running out of room to store container imports. Turns out a bigger wave of issues were coming with port authorities and their declining port finances.
Sea-Intelligence has recently released their weekly analytical report which shows that blank sailings has increased 45 to 212. Blank sailings are when ocean freight is cancelled. This was reported on April 5th and since then a new report has shown an increase of 384 blank sailings, as of April 12th. “The largest capacity withdrawal is seen in the Asia-Europe trade where we will now enter a 4-week period with 29-34% of the capacity having been removed from the market,” says Alan Murphy, CEO of Sea-Intelligence, a leading provider in maritime data and analysis. Sea-Intelligence reported that, “On Asia-Europe and Transpacific combined, the carriers have now removed 3 million TEU of capacity. To put this into perspective, this equals 2.4 times the normal removal seen during Chinese New Year.” West coast ports have had a major impact due these ports having more connection with China compared to east coast ports. As China manufacturing begins to recover, blank sailings may begin to dissipate, says Mark Szakonyi, Journal of Commerce (JOC), Executive Editor. He says,” The question then becomes how fast will US imports from Asia and China – both down by double-digits on a year on year basis — recover. If volumes jump fast enough, that will mean space on outgoing vessels from China will get tight.” This then places pressure on the cargo owners which must prioritize the higher paying cargo.
The Journal of Commerce reported that, “One of the main contributing factors behind the bottlenecks is related to new rules by China Customs for the clearance and inspection of PPE that lengthens the process and makes it difficult to observe a rule that allows a 72-hour window from when the cargo is cleared by customs to when it is loaded on a plane.”
The ports and its containers aren’t the only issue. Port Authorities (ports and transportation infrastructure) rely heavily on revenue from travel, tourism, and conventions. It makes up for even more revenue than import and exports, according to Jock O’Connell an International Trade Advisor. Some sea ports have control over airports and that is affecting them more than maritime operations. Especially, Miami and San Diego who rely on revenue from cruise ships. As of now cruise ships are shut down. In a press release by the Port of Oakland from April 30th, it was reported that they are “Continuing operations at Oakland International Airport even though passenger traffic has declined 95 percent, full operations at the Port of Oakland Seaport, though total cargo volume dropped 11 percent last month.”
O’Connell says, “More specifically, it’s the revenue generated by aviation operations that often provides most of the financing for port authorities from Boston to Seattle. And since the collapse of air travel has been much steeper than the fall-offs in maritime trade volumes, the governing bodies of a number of ports across the country are seeing their revenue flows slowing to a trickle, a situation that is unlikely to be quickly alleviated.”
The Federal Maritime Commission (FMC), which is an independent federal agency responsible for regulating the U.S. international ocean transportation system for the benefit of U.S. exporters, importers, and the U.S. consumer, has authorized Commissioner Rebecca Dye as the investigating officer for Fact Find No. 29 International Ocean Transportation Supply Chain Engagement. In this lead, she will identify and work with key executives on solutions to cargo delivery system challenges related to the coronavirus. The FMC stated that Commissioner Rye said, “The United States depends on reliable international ocean freight delivery to support the economic security of our country. The maritime supply chain extends upstream and downstream from the ports and closely located logistics centers to American exporters and importers and keeping the system functioning is a priority of national importance. This initiative is an effort by the Commission to do everything we can to eliminate pressing problems in the freight delivery system.” As COVID-19 continues to develop so do the issues at the port as they face uncertainty.