San Diego Plays Role in Mitigating ‘Containergeddon’ As Holiday Retail Crisis Approaches

FILE PHOTO: The congested Port of Los Angeles is shown in San Pedro on September 29. REUTERS / Mike Blake

The Flying Buttress once crossed the oceans, transporting vital goods like grain to all corners of the world. Now it contains different treasures: Paw Patrol Movie Towers and Batmobile Transformers.

The dry bulk freighter has been put to the service of retail giant Walmart, which charters its own ships in a bid to tackle global supply chain disruptions that threaten to torpedo the landmark holiday season of the retail industry.

“Chartering ships is just one example of the investments we’ve made to move products as quickly as possible,” said Joe Metzger, US executive vice president of supply chain operations at Walmart, who has chartered a number of vessels this year.

The goal is to bypass congested ports and secure limited ship space at a time when COVID-19, along with US-China trade disputes, equipment shortages and extreme weather, have exposed fragility. supply lines across the world used for everything from food and fashion to drinks and diapers.

More than 60 container ships carrying multi-billion dollar clothing, furniture and electronics are stranded outside the Los Angeles and Long Beach terminals awaiting unloading, according to the Marine Exchange of Southern California.

One option – avoid the traffic jam by choosing another port nearby, in this case San Diego. Home Depot, the home improvement retailer, dodged the LA traffic jam by sending its charter vessel Great Profit south of the Port of San Diego.

Before the pandemic, it was unusual for more than one ship to be in the queue at U.S. Port Complex No.1, which handles more than half of all U.S. imports.

Other big retail players, such as Target, Home Depot, Costco and Dollar Tree, have also said they are chartering ships to deal with the pandemic downturn in shipping networks that handle 90% of global trade.

Or, as Steve Ferreira of shipping consulting firm Ocean Audit describes the growing concern: “Containergeddon.”

The traditional lifeline of American retailers from Asia is stuck due to a resurgence of COVID-19 in countries like Vietnam and Indonesia, as well as an electricity supply crisis in China . Grunts in supply coincide with booming demand, with consumers spending more on goods than on meals out or travel.

And the festive shopping season looms.

Burt Flickinger, chief executive of retail consultancy Strategic Resource Group, said at least 20-25% of goods stranded on ships are unlikely to arrive on shelves in time to kick off the Black Friday November 26 for the holiday shopping season, a time when retailers make more than a third of their profits.

This prompted the bigger chains to take matters into their own hands.

In a typical year, Walmart would have moved toys from China to Los Angeles in hundreds of 40-foot crates stacked like colorful bricks on gigantic container ships.

But 2021 is far from typical. Cargo entering the Port of Los Angeles is up 30% from record levels last year. Trucks and trains cannot remove it quickly enough, leading to traffic jams, port executive director Gene Seroka said, reflecting increased consumer demand.

“It’s like taking 10 lanes of highway traffic and squeezing them into five,” Seroka said.

Charter ships that provide valuable cargo space and can bypass container terminals will play a vital role in this second pandemic holiday season, especially for urgent goods like Christmas sweaters that won’t sell if they arrive too much. late.

The Flying Buttress, for example, entered Los Angeles waters on August 21. It got stuck in a queue outside the port before bypassing clogged terminals and unloading its cargo at a separately operated bulk cargo dock on August 31, according to data from Refinitiv. and shipping records.

On this trip, Walmart bypassed the shortage of 40-foot containers typically used for global shipping by switching to larger 53-foot containers that are almost exclusively used to transport goods by truck and rail in the United States. United.

Home Depot said it was “working creatively to get extra capacity.”

On September 15, ship-mounted cranes hoisted 7-foot Halloween “magic witches”, Christmas lights and other holiday decorations to the docks in San Diego, said Ferreira, CEO of Ocean Audit, who helps shipping customers recover overpayments.

” It’s the last straight line. They are doing whatever it takes to win in an overheating market, he said of retailers.

Still, there is a limit to such workarounds.

Great Profit docked at a terminal that handles everything from sugar to wind turbine blades, but can only accommodate a maximum of 500 containers of one to two ships per month by the end of the year, said Greg Borossay, director of maritime affairs development for the port.

That’s because San Diego, like many other US seaports, does not have the huge gantry cranes needed to pick up crates from massive ships.

In addition, the rail service is equipped for automobiles and other specialty goods. In addition, the roads in the surrounding commercial and residential areas are not prepared for the truck fleets needed to transport thousands of containers to other parts of the country.

“We would have a very unhappy community if we had 3,000 (boxes) coming out of a ship,” Borossay added.

The global supply crisis, however, offers lucrative opportunities for bulk cargo operators; they are benefiting from a record spike in container shipping rates that has pushed freight costs above $ 20,000 per box on the largest liners.

Global container shipping players like AP Moller Maersk and Hapag Lloyd are bursting with cash thanks to soaring rates. The outline “puts in whatever ships we can find,” said Hapag Lloyd CEO Rolf Habben Jansen.

(Reporting by Lisa Baertlein in Los Angeles, Jonathan Saul in London and Siddharth Cavale in Bengaluru; with additional reporting by PJ Huffstutter in Chicago and edited by Pravin Char)

– Reuters

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