Supply chain snags at US ports seen stretching through 2022

A perfect storm of logistics logjams amid a crush of incoming containerized imports has squeezed US resin exports just as supply availability is seen improving after a year of weather-related production setbacks.

US outflows of polyethylene, polypropylene and polyvinyl chloride in 2021 were 18.5% lower than in 2020, according to US International Trade Commission data, largely because severe weather events forced widespread production shutdowns that squeezed supply. Waterborne exports, which make up more than half of total outflows of those resins, fell nearly 33%.

By end-2021, supply availability had largely recovered with exports poised to ramp up.

However, a confluence of supply chain snags that had emerged separately earlier in 2021 roared back all at once, causing backups in waterborne outflows that market participants see lasting through much of 2022.

"It's not any one person or one thing's fault," a logistics provider said. "It's not the ports or truckers or warehouse people. I don't really see a clear path to this being over."

"This" refers to multiple factors:

• An influx of containerized imports, mostly from Asia, feeding the world's largest economy's demand for everything from vehicles and appliances to everyday items purchased online or in big-box stores.
• Many import containers are placed on chassis when offloaded from ships, siphoning already tight chassis availability needed to move empty containers to resin packaging warehouses and then haul loaded containers to ports.
• Each container on a chassis needs to be hauled by truck to a rail terminal, its final destination or to and from resin packaging warehouses and ports, and the influx has stretched already thin truck and truck driver availability.
• Resin packaging warehouses fill up with packaged material, reducing ability to package new incoming pellets or powder until those 55-lb bags stacked on pallets get moved out.
• If those hurdles are cleared and resin cargoes are booked for loading on ships, container vessels increasingly pass by without stopping, rolling the booking to the next ship, and the next, with no guarantees of when one will stop and load it. Ocean carriers have discretion of whether to stop so they can maintain schedules and ensure prompt returns to high-revenue generating regions in North Asia.

"We're seeing rolls like never before," a resin trader said. "There have always been times of rolls when they overbooked, but now it is constant. Every week we're getting full bookings that are being rolled."

A logistics source said producers can "buy their way" out of the problem by paying more to load cargoes or divert them to other ports for loading. The additional cost is often worth paying to avoid backups that can force rate cuts at production plants.

But traders typically lose money if they back out of export deals, leaving them with less flexibility, the logistics source said.

Eventually, backups can prompt railroads to issue embargoes to incoming railcars carrying resin for packaging to warehouses, effectively blocking future deliveries until the logjams are cleared.

"It's just the same thing happening over and over, and we end up in this gridlock situation," the logistics source said.

The COVID crush

Piecing together how so many parts of supply chains hit snags at the same time involves looking back to the first quarter of 2020, when COVID-19 began spreading, prompting shutdowns in Asia that upended worldwide trade flows.

As global consumer demand cratered, manufacturing and shipments out of Asia slowed, and US exports declined.

As China began reopening, COVID-19 had spread globally with shutdowns in other regions, including Europe, North America, Latin America and the Middle East. India also shut down in the second quarter of 2020 in an effort to stem the spread.

During initial Asian shutdowns, other regions grappled with the decline in imports, and when some Asian regions began reopening, other regions were shut down, sharply cutting import demand.

Then when other regions began reopening by mid-2020, demand surged for everything from new homes and cars to appliances and other big-ticket items.

That demand has remained strong, prompting more import flows that overwhelmed ports and companies that raced to rehire dock workers, truck drivers and others to keep supply chains moving.

Supply chains couldn't keep up.

Until supply chain problems are sorted out with more drivers, trucks and inland storage space, we do not expect to see a rapid decline in the backlogs being experienced
- Ben Hackett, Hackett Associates

The Ports of Los Angeles and Long Beach – the busiest container ports in the US – faced dozens of ships floating offshore waiting to berth throughout late 2020 and 2021, peaking at more than 100 vessels queued in the waters off Southern California in January of 2022.

Ships began diverting to other ports to unload cargoes and return to Asia to load up more containerized imports. Those diversions included major US resin-exporting ports: Houston, Texas, the second-largest petrochemical port in the world behind Rotterdam; Charleston, South Carolina; and Savannah, Georgia.

According to the National Retail Federation, the US received 25.84 million twenty-foot equivalent units, or TEUs, which are the containers commonly seen at ports or hooked up to semi-trailer trucks. Los Angeles and Long Beach received 10.1 million of those TEUs, or 39%, according to port statistics.

Savannah, a major import center for the US Southeast, received 2.84 million, or 11%; Houston received 1.76 million, or 6.8%; and Charleston received 1.36 million, or 5.3%.

New Orleans typically receives far fewer imports – 221,668 TEUs, or less than 1% of the 2021 total – and has empty containers shipped via barge from Federal Express's terminal in Memphis, Tennessee, to load with export-bound resin. Market sources said the issue for New Orleans, where imports fell 18% in 2021, is container vessels that don't stop.

Contagious congestion

US imports in January fell 1.2% year on year, according to Panjiva, the trade analysis unit of S&P Global Market Intelligence. Panjiva also said imports through Los Angeles and Long Beach in January fell 11.9% year over year, but rose in others. Other California ports saw a 30.3% increase in January imports, and increases of less than 10% were seen in the New York/New Jersey port system as well as ports in the US Southeast and Southwest.

Houston remains by far the top resin-exporting port in the US, having moved out 34% of 8.44 million mt of PE, PP and PVC exported in 2021. At the Port of Houston, resins and plastics made up 43.4% of all containerized exports in 2020, the most recent data available.

While overall PE, PP and PVC outflows declined in Houston, New Orleans and Los Angeles, they rose in Charleston and Savannah, USITC data show. Charleston also displaced Los Angeles as the third-largest exit point for waterborne exports of those three resins.

Charleston's PE, PP and PVC outflows in 2021 rose 68% to 479,443 mt, while Savannah's outflows of those resins rose 11% to 180,616 mt. Outflows from Los Angeles fell 47% to 223,054 mt, USITC data show.

Those shifts reflect the container clogs at Los Angeles and Long Beach, market sources said, but Charleston and Savannah are not immune to the import influx.

"Congestion continues on both coasts, with ships queuing for berths at multiple ports," said Hackett Associates founder Ben Hackett said.

"Problems remain with clearing import containers to their inland destinations while export containers are still being held back due to lack of space at the terminals. Until supply chain problems are sorted out with more drivers, trucks and inland storage space, we do not expect to see a rapid decline in the backlogs being experienced," he said.