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The end of Shanghai’s lockdown will unleash a backlog of cargo on West Coast ports—the world’s least efficient docks, S&P says

May 27, 2022, 8:21 AM UTC

The end of Shanghai’s COVID lockdown is unlikely to mark the end of the global supply-chain crisis.

On Thursday, Shanghai officials said that daily container throughput in the city’s port, the world’s largest, is back to 93.5% of normal levels, as the city eases out of COVID lockdowns that have lasted over seven weeks and snarled the shipping terminal’s ability to process cargo.

The port had about 260,000 20-foot containers waiting to be shipped in April, according to data from Drewry Shipping Consultants. Shanghai officials are targeting June 1 for fully lifting the city’s strictest lockdown measures, and as controls loosen, the city’s port will begin to work through a backlog of exports.

But greater loading from Shanghai will mean greater unloading in ports on the U.S. West Coast. That could be a problem. According to a new report released by the World Bank and S&P Global Market Intelligence, ports on the Pacific coast of the U.S. are the world’s least efficient, and are already struggling to handle the cargo they’ve got.

Inefficient U.S. ports

The World Bank report measured the total time a ship spent at port across 370 locations worldwide in 2021, including time ships spent waiting offshore for a free berth. According to the ranking, the West Coast ports of Los Angeles and Long Beach are the world’s least efficient. Those two ports also handle 42% of all container trade from Asia.

Record consumer spending in 2021 meant a major increase in maritime traffic beyond what the ports on the West Coast could handle, leading to congestion as ships waited to unload their cargo. Labor shortages and a lack of warehouse space are also limiting their ability to handle more cargo.

In the first week of 2022, congestion at ports like Los Angeles, Long Beach, and Oakland (ranked No. 359 by the World Bank and S&P) meant that a container ship was spending an average of 10.9 days at berth, according to a recent report from shipping tracker Windward and Sea Intelligence. That berth time is twice the average of 2021.

Los Angeles and Long Beach are in the middle of negotiating new contracts for 22,000 dockworkers; a protracted negotiation—or disagreement—could add to delays if workers engage in actions like work slowdowns or stoppages to strengthen their negotiating position.

On May 21, Mario Cordero, executive director of the Port of Long Beach, told Bloomberg the negotiations were unlikely to meet a July 1 deadline, though Cordero was “optimistic” that a deal would be reached. A previous 2014 standoff between port operators and dockworkers created a slowdown that lasted almost nine months, and was only resolved with the help of the Obama administration.

One sticking point in negotiations this time is the automation of port operations. Port owners argue that automated ports could handle cargo twice as quickly as nonautomated ports, yet a representative from the dockworkers union called the claim “a shell game to mask the human cost of job destruction.”

An easing lockdown

The World Bank’s report ranks Yangshan Port in Shanghai as the fourth best port of 2021, in terms of efficiency. However, the past two months of COVID lockdowns have wreaked havoc on supply chains and undoubtedly tanked the port’s overall efficiency rating.

Shanghai’s COVID lockdown has closed factories, as workers stay home and manufacturers can’t get parts. COVID restrictions have also prevented truckers from driving across the city to unload shipping containers. Continued restrictions, such as requiring truck drivers to provide regular negative COVID tests, will ensure local logistics operations remain strained even as the city’s port reopens for business. 

In the first three weeks of May, road freight traffic in Shanghai was 81% lower than the same period a year ago, according to data from G7 Connect, a Beijing-based trucking company.

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