Biden Sees Gains in Supply Chain Battle, but the Fight Isn’t Over

Updated: Dec 15, 2021

By The Washington Post

This article was published in The Washington Post November 26, 2021.

President Biden’s claim to have eased bottlenecks at a vital U.S. port complex marks an initial win in what is likely to prove a long campaign to free Americans from tangled supply chains.

The president in recent days cited progress in moving shipping containers off Southern California’s crowded docks and a decline in spot rates for ocean cargo as evidence that the administration’s push to ensure that store shelves are stocked for the holidays is paying off.

“Because of the actions we’ve taken, things have begun to change,” Biden said in a speech at the Eisenhower Executive Office Building.

Coupled with assurances of adequate inventories from retailers including Walmart and Target, the sunny shipping news represented a welcome development for Biden. The president’s public approval ratings have sagged in recent weeks as consumers soured on goods shortages and the highest inflation in 30 years.

Yet even as Biden took credit for the turnaround, industry groups and logistics specialists warned that a return to the smooth flow of goods that was typical before the pandemic remains a long way off.

“It’s still a hot mess,” said Stephen Lamar, president of the American Apparel and Footwear Association. “We have to dig ourselves out of a daunting hole to get a sense of anything like normalcy, and that’s going to take a long, long time.”

Administration officials in recent weeks have steered supply chain participants toward coordinated action to clear clogged freight channels, including calling for round-the-clock dock work. And the mountains of freight marooned on wharves have slowly started to shrink.

But the goods pipeline won’t really operate normally until Americans return to their traditional spending patterns, abandoned amid the pandemic. And there is no sign such a shift is imminent. Likewise, some of the president’s policy remedies, including $17 billion in new port spending and potential antitrust moves against the three main shipping alliances, will take years to produce benefits.

Disjointed supply chains have become a distinguishing feature of the global recovery, affecting each of 45 economies surveyed by Oxford Economics. Current disruptions are likely to peak before year’s end and “mostly ease” by the second half of next year, the investment firm said, citing falling shipping rates and signs that companies are succeeding in rebuilding depleted inventories.

Spot rates to send containers from China to the U.S. West Coast have dropped 25 percent in less than three weeks, as the holiday cargo tide recedes, according to the Freightos index. But in a reminder of today’s unusual conditions, the current $14,185-per-container cost remains more than 10 times its pre-pandemic level.

As supply hiccups escalated this summer, the White House formed a task force drawing on multiple Cabinet agencies and appointed a “ports envoy” to untangle the cargo jams.

Quick improvements proved elusive, since the nation’s supply chain is almost entirely a private-sector enterprise. John Porcari, the president’s ports envoy, has focused on jawboning cargo carriers, terminal operators, port directors, trucking companies and retailers in hopes of producing a consensus on needed steps.

The most visible progress came earlier this month following port officials’ threats to levy daily fines on containers left clogging the docks. Within weeks, dockworkers had whittled the 95,000 shipping containers blocking L.A. terminals’ work areas down to 71,000, according to Gene Seroka, executive director of the Port of Los Angeles. The neighboring Long Beach facility saw similar gains.

Citing significant improvement, the ports have now delayed implementation of the fines until Monday. But carriers, which face potential multimillion-dollar penalties, are hounding customers to collect their goods.

“They send me an email every day. They’ve put on a lot of pressure,” said Craig Grossgart, senior vice president for Seko Logistics. “It’s very consistent. Every single day without fail.”

Dockworkers also are clearing space by shifting containers full of out-of-season goods, like patio furniture, to lots near the water, including a mothballed L.A. terminal once used for coal exports. Many of these containers would have occupied truck trailers, known as chassis, which now are free to transport other goods.

“That’s going to improve the overall fluidity,” said Val Noel, chief operations officer for Trac Intermodal, a chassis provider.

Yet even as loaded containers are moving out, empty containers bound for Asia are moving in. Cargo carriers have deployed a handful of dedicated vessels known as “sweepers” to retrieve thousands of empties. But the ships are much smaller than the typical container ship arriving from China and can only make a dent in the growing container pile.

More than 100,000 metal boxes are stranded at the twin Southern California ports, slowing normal terminal operations, according to Matt Schrap, chief executive officer of the Harbor Trucking Association.

Other administration initiatives have been less successful.

Last month, the White House announced that the two California ports would begin operating around-the-clock, seven days a week to clear the cargo jam. But more than a month later, that remains only an aspiration.

No terminal at either port is truly open on a 24-7 basis. One of seven container terminals in Long Beach is open 24 hours, four days a week on a trial basis.

Truckers generally are not interested in picking up shipments in the predawn darkness, since few inland warehouses are open at that hour to receive them. Many terminals also require truckers to drop off particular brands of empty containers, further complicating the pickup and drop-off process.

For months, the most visible sign of supply chain dysfunction has been the floating traffic jam off the Southern California coast as container ships lined up to await an unloading berth.

Before the pandemic, ships typically sailed directly from Asia to a spot along the docks. But in recent weeks, more than 80 ships each day could be glimpsed swinging at anchor a few miles offshore.

Effective Nov. 16, a new queuing policy took effect, which essentially shifted the seaborne traffic jam farther from the coast. Instead of parking within sight of the docks, ships will now be forced to loiter 150 miles from shore.

The maritime industry groups that developed the new procedure, including the Pacific Merchant Shipping Association, said the goal was “to improve safety and air quality” by moving container ships.

The shift has had the added advantage of triggering a decline in one of the most closely watched indicators of supply chain trouble. From 86 ships on the day the new policy took effect, the number of anchored container vessels has fallen to 61, according to the nonprofit Marine Exchange.

As holiday shipping volumes drop, the supply chain may get a temporary respite. But fresh headaches loom in 2022, including potential labor unrest before the expiration of the dockworkers’ contract at the end of June.

There also is little sign that Americans’ demand for imported goods is cooling. On Wednesday, White House economists noted that consumer spending on goods, as a share of total consumption, remains unusually high.

Unless Americans devote a larger share of their spending to services such as restaurant meals, hotel stays and concert tickets, and buy fewer goods that need to be shipped to their homes, the supply chain will struggle.

“The worst is behind us,” said Thomas O’Brien, executive director of the Center for International Trade and Transportation at California State University in Long Beach. “But it’s going to take some time not only to get the backlog cleared, but also to meet the still-accelerating consumer demand. That’s going to keep these cargo ships full and coming.”

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