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Supply chain: 'We are seeing more shifts' to America's East Coast

Shippers have started sending more freight to ports on the East Coast while the other side of the country navigates supply chain woes.

According to the latest data from the Port Authority of New York and New Jersey, there were an average 22 container ships waiting per day at the Ambrose Anchorage, which serves the NYC metropolitan area. Ships waited an average 5.25 days to actually dock.

In its latest market update, Flexport said "East Coast and Gulf congestion will continue through July, with vessels at anchor in New York, Norfolk, and Savannah; 36 ships at the end of June awaiting berths with wait times in the 7-10 day range."

"We are seeing more shifts coming over here," a spokesperson from Port Authority of New York and New Jersey told Yahoo Finance. "We are handling right now 33% more containers that we have when we were in pre-pandemic 2019 in the same period."

People look at CMA CGM Marco Polo container ship as it travels in the New York Harbor on May 20, 2021. (Photo by Michael Nagle/Xinhua via Getty Images)
People look at CMA CGM Marco Polo container ship as it travels in the New York Harbor on May 20, 2021. (Photo by Michael Nagle/Xinhua via Getty Images)

'Sending their goods to all four corners'

Port Authority saw an 11.5% growth in imports through May and estimated that 6.5% of it was originally intended to be shipped to the West Coast.

The change started during the pandemic after congestion at the Ports of Los Angeles and Long Beach caused massive backups, pushing some retailers to use trade diversification.

"Retailers, they are basically sending their goods to all four corners of the United States instead of just all going to the West Coast... that's because of the supply chain issues that's been happening in the past two years," the Port Authority spokesperson said.

"They decided that they would rather just get it here [the East Coast] and then just truck it, or rail it to the final destination, wherever it may be and that could end up, will end up being faster and sometimes cheaper than just sending everything to the same port on the same coast," they added.

This is more expensive: It costs around $7,400 to transport 40-foot container from China to the West Coast while the cost of shipments to the East Coast are around $9,900, according to Freightos Baltic Index Data.

Prices for shipping to the West Coast getting cheaper, with Oxford Economics data showing prices down 20% month-over-month.

LA & Long Beach: Container ships queuing
LA & Long Beach: Container ships queuing

"In the last couple months, it seems that as there's been this decreased in demand all of a sudden," Judah Levine, head of research at Freightos, told Yahoo Finance. "There's extra space on these vessels and now rates have started to fall."

Port bottlenecks in LA County that tied up U.S. supply chains and the two-month lockdown in Shanghai caused some retailers to "pull forward" in their goods, which allowed "these volumes that normally would come across during peak season [July or August]" to be sent ahead of time.

"It doesn't necessarily mean... that there's nothing coming in," Levine said. "It just means that we're coming down from this very high level, which is still a big change because we haven't seen that."

At the same time, Levine added, demand is cooling off, causing a "buildup in inventory." Businesses have been impacted by the change in consumer spending habits. Target (TGT) is an example of one major retailer that has cut its outlook again as it seeks to address its excess inventory.

"Normally you'd start to see more volumes coming in now than you were in the last couple months," Levine said. "And that might not be the case. We might have lower volumes in July, August, and September than we had just now in May, and maybe it'll be similar to what there was in March and April, but they're still gonna be quite elevated from a year ago."

President Biden walks after speaking during a visit to the Port of Los Angeles, during the Ninth Summit of the Americas in Los Angeles, June 10, 2022. REUTERS/Kevin Lamarque
President Biden walks after speaking during a visit to the Port of Los Angeles, during the Ninth Summit of the Americas in Los Angeles, June 10, 2022. REUTERS/Kevin Lamarque

Contract concerns

Another main focus for the global supply chain — and what could lead more shipments to opt for the East Coast — is the labor contract for U.S. West Coast dockworkers that expired on July 1.

The International Longshore and Warehouse Union and the Pacific Maritime Association, which represents more than 70 employers, are negotiating a new contract for thousands of dockworkers across 29 West Coast ports.

Both parties said there will be no contract extension and cargo will continue to keep moving, reaffirming that they’re committed to avoid disruptions that would further hobble supply chains.

Data from project44, a technology company that works with sipping companies, suggests that cargo owners using the Trans-Pacific Trade Lane may be worried about the potential disruption with no new contract or extension.

Ports experiencing an increase in trade include New York, Newark, Savannah, and Charleston. According to project44, the combined TEU (twenty-foot equivalent unit) capacity for vessels arriving at these East Coast ports in June was nearly 20% higher than just a few months prior in February.

(Source: project44)
(Source: project44)

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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