Why Are Container Lines Still Queuing outside of Congested LA-LB Ports?

Record number of ships emerge in LA-LB ports again! In recent months, a matter of repeated congestion like this will no longer surprise people. Nevertheless, have you ever wondered why carriers continue to route through congested LA-LB ports despite having to anchorage outside the port for several weeks?

Do the carriers really waste their time?

Carriers are, in fact, making an “entirely rational” decision. There are a few reasons for the carriers to do so, and for the sake of simplicity, we separate the issue into two groups: small and large carriers. In this context, “small” refers to various newcomers to the market, all of which are non-alliance carriers, whereas “large” refers to large alliance carriers.

First, a view on the small newcomers to the trade.

Aren’t they aware that the vessels might get stuck upon arrival off the coast of California? They are, of course! But if shippers are willing to pay $15,000-$20,000/FEU to transport their freight, why should carriers deny their requests? With sky-high rates and a capacity shortage, small carriers see this lucrative market as a commercial opportunity to make a fortune. Most importantly, free competition is clearly working through trans-Pacific routes; that is, large players can not restrict new entrants into the industry.

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Some of the capacity comes from existing large carriers.

Without a doubt, they are aware that the traffic jam situation will persist and even worsen in the future. They have no choice but to add more vessels to queue for berths along the west coast of the United States.

Given that the three major alliances have announced that they will cancel a number of sailings on the Pacific in order to prevent an even worse queue off the coast of southern California. Regardless of the fact that many importers will be unable to transport their cargo out of Asia, this implementation will definitely lead to accusations of collusion related to artificial manipulation by reducing capacity and increasing rates.

Instead, large carriers will continue to send vessels to transport the shipments, worsening the congestion along the coast of southern California.

As a result, the carriers will be unable to alleviate the bottleneck. The solution to the severe congestion is much more closely linked to the inland logistics – getting the cargo to the port is useless until there is enough truck, chassis, and rail capacity, as well as warehousing space, to move the cargo away from the ports.

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SOURCE: JOC