US port delays: Outcome of holidays will determine if supply chain crisis extends into 2023, experts say
Omicron has once again stoked fears of more disruptions in the economy
Port of Long Beach executive director predicts backlog at ports will ease in 2022
Port of Long Beach executive director Mario Cordero notes the improvement is dependent on the coronavirus and its impact on the labor force.
With the U.S. past the peak of consumer demand and the winter holidays nearly over, experts say the next couple of months will be critical to determine whether the supply chain crisis brought on by the pandemic will extend into 2023.
Aaron Terrazas, director of economic research at Convoy Inc., a digital freight networking company, told FOX Business that the congestion at the ports has stabilized in recent weeks, but isn’t necessarily better.
FILE: Stacked containers are shown as ships unload their cargo at the Port of Los Angeles in Los Angeles, California, U.S. November 22, 2021. (REUTERS/Mike Blake)
"It doesn’t really look like it has gotten substantially better in that the throughput, the number of boxes coming off of boats and onto trucks and warehouses, has basically stayed flat," Terrazas said. "But the number of ships waiting at anchor has declined, largely due to fewer inbound ships."
Consumer-based imports peak, Terrazas said, between August and October. Historically, there is a lull between November and January and going into the Lunar New Year. Because of this, ports are usually able to catch up on the backlog of delays.
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"Lunar New Year and early February is going to be a real litmus test for how the rest of 2022 will play out if ports are able to make backlog in the seasonal lull in January and early February," Terrazas said. "Then I’d be more optimistic that 2022 could see some of these delays cleared. By contrast, if we don’t see progress made between now and mid-February, I think this extends into 2023 in that case."
Containers are seen at the port in San Pedro, California, U.S. (REUTERS/Bob Riha, Jr.)
Ports have become one of the many bottlenecks in global supply chains as ships have been filling up with boxes carrying everything from electronics to Christmas decorations. The backlogs have led to some empty shelves at stores during the busy holiday shopping season. The crunch at the nation’s ports has consisted of a backup of nearly 160 ships in the Los Angeles area alone.
Jennifer Blackhurst, a professor of business analytics at the University of Iowa Tippie College of Business and a global supply chain expert, forecasts that congestion will shift to internal transportation systems once it’s cleared up at the ports.
"If you talk to someone who works for UPS, sure the big rush was leading up to the holiday season, but it doesn’t really slow down for them," Blackhurst told FOX Business. "So, now they’re really going to be dealing with a crushing number of returns."
She added: "The bottleneck has shifted. Now that we can start to see hopefully, that the ports (will) not be as congested, then the bottleneck will perhaps become the transportation system within the United States which is now being further clogged up by all of these returns."
But though the ports crisis may have eased with January on the horizon, the omicron variant of COVID-19 has once again stoked fears of even more disruptions in the economy in the weeks and possibly months to come.
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"I’d say my biggest concern about omicron is that even if it doesn’t result in an elevated rate of hospitalization or mortality risk, it still has the potential to be incredibly disruptive to supply chains in the labor force," Terrazas said.
To the extent that it’s more contagious, he added, workers will have to stay home, temporarily quarantine themselves, and take care of their families.
"I am very worried about warehouses and distribution center operations and the risk that those facilities have with respect to staffing if this continues," he said.
FILE PHOTO: Container ships wait off the coast of the congested Ports of Los Angeles and Long Beach in Long Beach, California, U.S., October 1, 2021. (REUTERS/ Alan Devall/File Photo)
Terrazas said the pandemic and subsequent supply chain crisis has heightened awareness of the degree to which the U.S. economy has become overly dependent on a handful of trade lanes and trade partners over the past two decades.
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For the time being, however, many companies are merely scrambling to keep operations running and not necessarily thinking long term, Terrazas said. However, he hopes that once the dust settles, "there will be new business relations and new patterns and new sourcing patterns that kind of happened by accident that will prove more durable."
Fox Business’ Andrew Mark Miller contributed to this report.