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Time for shippers to think again about diverting US west coast cargo to the east

Date: Wednesday, June 3, 2015
Source: The Loadstar

US shippers that diverted Asian imports to east coast ports to avoid the heavily congested Pacific coast container terminals could do well to review their strategy following a return to normality on the west coast.

That is the view of liner consultancy SeaIntel, which has analysed the two ex-Asia tradelanes since January 2012 and concluded that schedule reliability to the US west coast is consistently at a higher level than to the east coast.

During the two-year period to December 2013, SeaIntel said, there was “not a single month” where schedule reliability was at a higher level to the east coast than to the west. In fact, throughout this period its data shows that the reliability gap varied from 2.4 to 14.9 percentage points in favour of the west coast.

The congestion that began to form in west coast ports in July 2014, and which then peaked in January and February this year as labour agreement talks stalled, destroyed the schedule reliability of ocean carriers serving the region – at its worst, just 10% of sailings arrived on time.

Despite these bleak negative months, the overall score, for the full January 2012 to April 2015 period covered by SeaIntel, still has the west coast ahead with a score of 74.1%, compared with 70.9% for east coast services.

The one obvious reason for the disparity reliability is that the voyage from Asia to the US east coast is longer, thus increasing the risk of adverse weather, while the requirement of Panama or Suez Canal transits also present a potential delay in the schedule.

SeaIntel notes additionally that east coast services include more ports in their itinerary than respective strings to the west coast, further increasing the chance of delays.

Moreover, the northern east coast ports, such as New York, are far more likely to face weather-related stoppages in winter – an almost non-existent problem for Californian ports.

In theory, carriers should have more buffer time for the longer east coast transits and, therefore, more opportunity to regain schedules by speeding up delayed vessels, but SeaIntel found this to be “overwhelmingly not the case”, with carriers reluctant to increase fuel consumption by steaming faster.

Given the inferior schedule integrity of Asia-US east coast services, and with several of those ports also suffering congestion at their terminals, it remains an enigma as to why US shippers should continue to route traditional west coast gateway cargo to the east coast.

It is also more expensive: current Asia-US east coast spot freight rates are around $3,200 per 40ft, which is double to those on offer to west coast ports, a factor that has encouraged carriers to boost their east coast capacity – not only during the labour dispute, but also following it with six new strings added since the end of last month.

The addition of around 27,000 extra slots a week on Asia-US east coast services has so far not been reflected in any severe plunge in spot rates.

By introducing the extra services to the east coast, carriers have reacted to market demand from shippers, suggesting that diverted cargo will remain diverted for some time.

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