What Red Sea Disruption Could Mean for East Coast Ports
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Recent Houthi attacks targeting commercial cargo traffic in the Red Sea have had no shortage of global implications, freight rate increases and product delays among them. Now, America’s East Coast ports will be next to feel the ripple effects from the geopolitical crisis, according to Ben Hackett, founder of maritime consultancy Hackett Associates.
Addressing the latest Global Port Tracker report from Hackett Associates and the National Retail Federation (NRF), published Monday, Hackett said trans-Atlantic voyages from Shanghai to Savannah are running six days longer than what’s usually a month-long trip. Retailers like Next, the British fashion giant, are reporting up to two-week delays, he said.
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“The number of containers arriving at East Coast ports should not be directly affected if carriers add ships to maintain capacity, but shippers will have to adjust their supply chains to cope with longer transit times,” Hackett said in a statement. “We may see an increase of Asian cargo arriving at West Coast ports and then shipped east via intermodal rail, but doing so is costly and does not save that much time. As might be expected, carriers are passing on the additional voyage costs and then some.”
Brian Bourke, chief commercial officer of Seko Logistics, told Sourcing Journal that while Europe has seen the largest impact from the reroutings, the U.S. East Coast would feel the second largest impact, ahead of the West Coast.
This comes as much of the cargo business that shippers had recently given to East Coast gateways has already shifted back to the West Coast. Right now companies are worried about congestion at the drought-stricken Panama Canal and looming labor negotiations covering East and Gulf Coast ports.
“East Coast options now are becoming really limited,” Bourke said. “When everyone starts to shift their volumes to the West Coast and you have demand spike, that’s where you have the spillover that’s happening, where it’s not just Asia to Europe…this is having this ripple effect that we saw during the pandemic. If there’s congestion in Los Angeles, it’s going to cause congestion in Savannah.”
Bourke noted the challenges importers will face when planning their transportation budget this year, given the uncertainty of when major carriers like Maersk, MSC and Hapag-Lloyd will return to the Red Sea, as well as increasingly volatile freight rates.
“When you have 100 vessels waiting in queue in the San Pedro Bay, people are going to start using other options, but when everyone uses the same options all at the same time, that’s when you create this spillover,” Bourke said. “That’s what’s happening. You have a perfect storm of a couple of blockages that are creating constriction in supply.”
While Bourke doesn’t expect port congestion and freight rates to reach pandemic-level insanity, Seko framed the Red Sea crisis in terms of a notable disruption three years ago.
“It’s worse than when the Evergreen vessel was stuck in the Suez, because as disruptive as that event was, we all knew that that ship would get towed away at some point,” Bourke said. “Nobody knows when this is going to end.”
U.S. ports see 6.6% increase in cargo volume
The 10 U.S. ports covered by the Global Port Tracker handled 1.89 million 20-foot equivalent units (TEUs) of inbound cargo volume in November, up 6.6 percent from the year prior but down from last month’s projections of 10.5 percent growth to 1.96 million TEU.
The numbers were also down 8 percent from the 2.06 million TEU handled in October, but the decline is typical of the end of the pre-holiday peak shipping season.
Ports have not yet reported December numbers, but the Global Port Tracker projected the month at 1.89 million TEU, up 9 percent year over year.
That would bring 2023 totals to 22.3 million TEU, down 12.8 percent from 2022. Imports during 2022 totaled 25.5 million TEU, down 1.3 percent from the annual record of 25.8 million TEU set in 2021.
To kick off the new year, volume is expected to rise to 1.92 million TEU in January, a year-over-year increase of 6.1 percent, before slowing for the remainder of the quarter. February is forecast at 1.76 million TEU, up 13.8 percent year over year, and March is forecast at 1.7 million TEU, up 4.7 percent from last year.
February is traditionally the slowest month because of Lunar New Year factory shutdowns in Asia but the timing of the holiday and its impact on cargo varies. April is forecast at 1.79 million TEU, up 0.2 percent year over year, and May at 1.92 million, down 0.8 percent from last year.
