Fresh coronavirus outbreaks in Southern China are threatening to create new bottlenecks at America’s largest port again, even as the recovery in Western economies help to dramatically reduce its inventory.
In an interview with Yahoo Finance Live, Port of Los Angeles Executive Director Gene Seroka said he expected to see "a little bit of a lull" with roughly a third of its cargo coming in from the Pearl River Delta in the Guangdong Province.
“What we’re seeing is that 50% of normal productivity is taking place,” Seroka said. “Some of the liner shipping companies are omitting those South China ports. There is some cargo that's moving cross-border into Hong Kong. Hong Kong's five terminals are really full right now.”
With nearly 60% of its containerized imports coming from China, the Port of Los Angeles remains acutely sensitive to any delays in Asia.
China reported just 20 new coronavirus cases on Thursday, according to data from Johns Hopkins University. While that number remains well below the country’s peak last year, concerns about an outbreak linked to the Delta variant, first detected in India, have led to strict lockdowns in the vital industrial province of Guangdong.
That has contributed to massive shipping delays in major Chinese ports. In Shenzhen, an outbreak among dockworkers at the Port of Yantian brought traffic to a near halt. The Wall Street Journal reports some ships have had to wait up to two weeks to take on cargo at Yantian, causing the price of shipping to soar more than 60% since the start of the year. The world’s largest container line Maersk recently warned of delays of up to 16 days outside of Yantian, saying the situation was far worse than delays caused by a vessel blockage in the Suez Canal in March.
“I don't think we have an answer to [the extent of the delays]. We'll probably see a little bit of a lull, if they're working at 50% of capacity,” Seroka said. “When folks get back healthy, and on the job, we'll see the business pick up a little bit. But at a third, and with the information system, the port optimizer that we have being able to see three weeks out with some precision, we'll be able to manage this.”
The potential bottlenecks come as the Port of LA continues to rebound from the lows of the pandemic, with Western countries leading the economic recovery. In May, the port processed more than a million container units, marking the busiest month in the port’s 114-year history. Inventory is down by 75%, while the number of ships anchored and waiting to be processed is likely to reach near zero by the end of this month, Seroka said.
Outside of Los Angeles, port congestion continues to snarl supply chains causing significant challenges across sectors. On Monday, the National Retail Federation sent a letter to the White House, requesting a meeting with the Biden administration, to discuss solutions to alleviate the disruptions. In a recent survey of NRF member companies, more than 95% of retailers said they had been affected by port and shipping delays.
Seroka said maritime traffic is likely to ease in the second half of the year.
“We're going to be coming up on back-to-school season fall fashion, as well as year-end holidays. What remains to be seen, though, is how the American consumer pivots from buying these retail goods as we have for the last 11 months to getting back into the service sector,” he said.
Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita