We chartered a boat with a logistics expert to look at port congestion up close and saw how American greed is leading to shortages and empty shelves

For America's ports, the term "shortage" does not apply to container ships. Rising demand for goods during the pandemic has led to an increase in ships steaming towards US consumers. Nowhere is the pressure greater than Southern California.

The Ports of Los Angeles and Long Beach have long been favored by shipping companies looking to get their goods on the quickest and cheapest routes to the US. But increased buying during the pandemic has tested the ports' capabilities.

A backlog of idle ships parked just miles from the shore have become the symbol of a nation gripped by shortages, from labor to goods. And the American public is starting to notice the effects as shelves lay bare in parts of the country.

Consumers are becoming frustrated by rising prices and a delay in receiving their purchases while companies and shippers are losing their patience.

Insider chartered a boat and brought along a logistics expert to find out what's causing the backlog, what can be done to alleviate it, and who's to blame. Here's what we found just off of the coast of Los Angeles.

The combined Ports of Los Angeles and Long Beach are the largest on the West Coast and among the closest to Asia, making them the ideal destination for the behemoth container ships that once offered timely and cost-effective ocean shipping.

As to why ships can't just use other ports, not all of them are created equal. Many on the West Coast are not capable of receiving the caliber of ships that frequent Los Angeles and Long Beach.

"I blame 150 years of supply chain optimization," Nathan Strang, Flexport's director of ocean trade lane management, told Insider of why ships are still steaming towards Los Angeles and Long Beach. "It's a sign of their success, that's causing the congestion."

Jill Rice, a partner owner of Port X Logistics, joined Insider on the expedition to explain what was going on at the port in real-time. "It's always been one of the harder [ports]," Rice said of moving goods through the Ports of Los Angeles and Long Beach, citing requirements and policies that they impose that other ports in the US do not.

Truck drivers need appointments to pick up and drop off containers at both ports, and face restrictions on the types of trucks they can operate at the ports. In California for example, trucks built pre-2005 must have a 2010-or-newer engine.

Source: California Air Resources Board

A shift to 24/7 operations at the port also means that more appointments are available. But the ports can't just stack up the containers until a driver comes to pick them up: "There's no space," Rice said.

Truck drivers that manage to get containers out of Long Beach are also facing issues getting them back to the port. "Right now, another big issue that they're going through is they are not taking a ton of empties back," Rice said.

"A lot of the congestion is due to the fact that there's nowhere to put the empty containers." Flexport's Strang said. "Having some way to get those empties stored and off the chassis so that we can pick up live containers, that would actually go very far."

The appointment system is a point of contention for logistics specialists that are constantly refreshing the ports' websites to find open slots, Rice said. There's been no talk of waiving appointments, according to Rice, despite the push to alleviate port congestion.

But experts agree that the ports are not entirely to blame, as they've been slammed with an unprecedented number of container ships coming to satisfy the demand from Americans buying goods during the pandemic.

"There's nothing that the ports actively did or the terminals or the carriers actively did, it's just a matter of throughput," Strang said. "It's kind of these unprecedented cargo volumes that's kind of the root of everything that's going on."

Charter ships are another challenge. "A company will pay to rent a whole boat and once it gets here, nobody really cares," Rice said, noting that terminals prefer to service their regular customers first.

Rice spotted one of the charter boats in the harbors during our visit. It's been sitting there since October 4 and our tour was on November 1.

Companies that charter entire boats can then sell unused space on the boats to recoup the loss involved with the expense. But there's no guarantee that charter vessels will be quickly serviced once they arrive at the Ports of Los Angeles and Long Beach, especially if the goods onboard aren't considered a priority.

Those bets on charter boats have cost some of Rice's clients an entire season's worth of revenue.

Auto companies have been among the most frequent charter customers during the pandemic, according to Rice, with car sales skyrocketing during the pandemic and leading to a similar shortage exacerbated by a chip shortage.

"The amount of money [auto companies] were paying for this stuff was insane, and it's still going on," Rice said.

Airfreight is a viable option for some of Rice's clients with goods that can be shipped by air. But it comes with a higher cost that many are not willing to pay after decades of inexpensive ocean shipping.

"The amount of time people are wasting and people missing their deadlines ... cost way more than the cost to charter a plane," Rice said, while also noting the space constraints of a cargo plane.

 

And ocean shipping is all that most of Rice's clients know. The problem is that they're still expecting the same rates and delivery times from before the pandemic, which simply don't exist anymore.

From afar, it looks as though the cranes aren't doing much and the port seems quiet. But as we moved closer in the harbor, it became clear that the port was a beehive of activity with cranes constantly picking up containers from ships and dropping them on awaiting trucks below.

It's a carefully orchestrated symphony that experienced dockworkers have perfected, evidenced in the swift motion of the cranes. The problem is that there are just so many containers that need to be moved, and a seemingly never-ending stream of ships eagerly awaiting the same treatment now even more so that the ports operate on a 24/7 basis.

On the day of our visit, a total of 159 vessels were in the two ports with 100 at anchor and 59 at berth, according to data from the Marine Exchange of Southern California. Of those 159 vessels, 102 were container vessels with 73 at anchor and 29 at berth.

"A good way to think of us is we're the air traffic control tower for the ports of both Los Angeles and Long Beach," Kip Louttit, executive director of the Marine Exchange, told Insider. "No one anchors without permission, no one even anchors where they select."

And although they seem randomly parked in the harbor, the Marine Exchange outlines "standards of care" to which all ships must adhere while at anchor or while loitering.

Waiting ships must be two miles apart, two miles from shoal water, out of traffic lanes, and have a bridge watch at all times. Anchored ships have shorter distance requirements between each other but follow similar requirements.

Standards of care also govern how ships must act during periods of inclement weather or high winds, which is a concern since ships can move around and potentially collide or block shipping lanes.

The Ports of Los Angeles and Long Beach are a natural choice for ships looking to move as many containers as possible. "When you look at the other ports on the West Coast, this is the only one with 13 terminals," Louttit said, adding that ships heading to the East Coast would have to go through the Panama Canal which has size requirements.

And it comes down to math. Shippers need to determine whether it's more time-effective to bear the backlog or head to another port.

"When you move a ship, you move all of those client's supply chains with it," Strang said. "Sometimes 12 days at anchor at LA might be better than going to Oakland for a lot of the clients and the cargo on board those ships."

Goods bound for Chicago, for example, might get there quicker through the Ports of Los Angeles and Long Beach even with the backlog, compared to a longer journey to the East Coast and the extra time it would take a truck or train to then get it to Chicago.

There are ships that don't wait in the backlog, including high priority ships and US-flagged ships traveling between Hawaii and the US mainland, according to Louttit.

The Marine Exchange has been tracking the backlog since it started in September 2020, when the number of ships at anchor started climbing to a 2020 high near 40. From February 2021, the number of ships at anchor began to decline but picked back up again in June as more companies sent ships in advance of the holiday season.

Both ports have been efficient and "proactive" at managing goods before the pandemic, Louttit said, citing Marine Exchange data that shows the normal number of container ships at anchor pre-pandemic was between zero and one. "The American public wants to buy stuff and the shippers are just meeting demand," Louttit said.

No new ships were scheduled to berth on the day of our visit while four were scheduled to berth on November 2, five on November 3, and six on November 4. But the number of vessels scheduled to berth were outweighed by new arrivals of ships due to anchor outside the port.

The A Kinka, has been waiting at anchor the longest of any container ship in Los Angeles/Long Beach Harbor, according to the data. It arrived from China on September 12 at 7:05 a.m.

Some of Rice's clients have been waiting since August to get containers out of Long Beach. And after five business days, the port charges shippers for containers that haven't left the port.

Getting a container out in five days is possible, but it comes down to "if you're lucky enough to get an appointment and if you're lucky enough to have the amount of drivers that you need," Rice said.

Some of Rice's clients have had ships diverted to nearby ports, including two to the Port of Oakland. Not all ships can just pick up and head for less congested ports, however, as the Ports of Los Angeles and Long Beach are uniquely equipped to handle some of the largest ships in the world.

And even if ships are capable of docking in smaller ports, the concern for logistics companies such as Port X is whether there will be enough warehouse space for transloading, or breaking down and resizing the shipments for transport.

The increase in shipping prices is also driving companies to get "creative" with how they fill containers, according to Rice, including exceeding their weight limits and floor-loading them.

Floor-loading means that companies are stacking loose items in the container instead of palletizing them to maximize container space. While it may give companies some extra space in a container, the challenge is palletizing the cargo once it reaches the US, especially given a pallet and labor shortage in the US.

Rice's job now is educating customers on best shipping practices to navigate the crisis, even if it means paying more. "We try to tell our customers: I know it's going to cost more but it's going to move faster if you palletize it," she said.

Filling containers past their weight capacity also creates issues since the State of California sets limits on how far overweight containers can be transported before the items inside have to be transloaded. Another problem, Rice describes, is that warehouses only wanted to transload big-ticket items.

But Rice's clients have more patience now that the shipping crisis has dominated the news cycle and become a "national emergency." But for Flexport's Strang, "some clients are patient, some are still frustrated," he said.

Out in the harbor, it's an eerie feeling as it's quiet and calm, despite being surrounded by ships for as far as the eye can see. Workers could be seen doing maintenance work, including painting the outsides of their ships.

"They may be bored sitting out there but somebody still has to be on the bridge, somebody has to make sure the generators are running, [and] somebody has to be cooking for these people," Louttit said. "They are doing normal ship's business to make sure that their ship is ready to work cargo."

The US Coast Guard is also monitoring the backlog, as its mission is to ensure ships coming to the US are safe and meet international requirements. That mission is all the more important given the large number of ships in the port and harbor.

"We're constantly monitoring all these vessels for who is coming, what their crew is, and what the conditions of these vessels are," Coast Guard Commander Stephen Bor told Insider.

Despite the existence of many ships in the harbor, emergencies at sea have not increased, which Bor says is a testament to the professionalism of the ship crews. "What I want to make sure is understood is that these are professional mariners that are professionally trained," Bor said.

What the Coast Guard has seen an uptick in, however, is medical evacuations due to the COVID-19 virus. "The one emergency that we have dealt with more than any other emergency in the past two years has been evacuating COVID-positive [crewmembers] off of these ships," Bor said.

The Coast Guard and Marine Exchange operate under a public-private partnership, giving the Coast Guard access to better equipment that's used to safely and effectively monitor the number of ships currently in the harbor. "The Marine Exchange certainly goes a long way to make sure that all the vessels that we have here are anchored and are safe," Bor said.

"The density of vessels is a concern to the Coast Guard," Bor said, noting that weather and high winds are among the top concerns. "Any time you have this number of vessels in a rather confined area of water, the potential risk increases by the mere fact that there are more vessels in the area."

Solving port congestion will require every participant to do their part, the experts say. Consumers may have to change spending habits, companies may have to change the way they ship goods from overseas, and ports may have to change their policies.

For now, backlogs may be more common at other US ports as more ships set sail with goods bound for American consumers. "I think we'll see [backlogs] regardless of the coast," Strang said, noting East Coast ports like the Port of Savannah are experiencing backlogs.

Even if no more ships joined the queue, it could take months to clear the current backlog, Rice and Strang said.

And with the latest estimates, container ships sitting off the coast of Los Angeles may be a common sight until 2023.