Trucking Prepares as First Effects of Coronavirus Hit Port Trucking Hardest

Photo: Effelle via Pixabay

The fears associated with the current global spread of the novel coronavirus, or COVID-19, have seeped into almost every industry – air travel and tourism, manufacturing, and now the trucking industry as well. While contamination is the first of the fears to come to mind for many, the virus and the fears of the virus create larger effects on the commercial trucking industry. The first to feel the effects of the virus have been companies that work in and around the ports.

Sheri Call, executive vice president, Washington Trucking Association, told HDT that her state – which is among the states with the largest number of infected patients – is already feeling the effects of the virus. “I’ve heard from several of our members that so far this year, the Port of Seattle is down by about 50 sailings,” she says. “That’s the kind of decline we’d normally see over the course of an entire year.” At the moment, Call said, warehouses in Washington state are “stuffed to the gills” with imported merchandise – mainly due to companies “pulling ahead” orders before the tariffs implemented against China by President Trump last year. “So they’re not feeling the pinch from the virus yet,” she said. “However, because our sailings are down, our trucking members are struggling right now, because there is less freight coming in or out of the port. So they report they are reducing capacity and laying off independent owner-operators at the rate of about one per day to deal with changing circumstances.

So we are already seeing some impact from the Coronavirus. But it’s too soon for us to accurately gauge how severe this outbreak will eventually be.” Part of the problem, Call said, is that it is difficult to get accurate information from inside China as to what is actually going on there. “Every day we hear a different story,” she said. “So we don’t have good intel from the source.

Although we are hearing that the Chinese government is ordering workers back to their jobs in areas away from the most infected areas in an effort to get their economy moving again.” But the coronavirus is having an impact on the volume of imported containers flowing into the Port of Long Beach. While final numbers have not been published, Lee Peterson, media relations manager at the Port of Long Beach estimated that containerized cargo in February is down 9% compared to the same time last year.

“In a normal year, there could be 20 to 30 ‘blank’ or canceled sailings in the first quarter for the two San Pedro Bay ports combined, due to the normal factory closures in Asia for Lunar New Year,” he said. “This year, we expect to see 60 canceled sailings in the first quarter, and the increase is due to the additional manufacturing impacts caused by measures in China to prevent the spread of COVID-19. For the Port of Long Beach alone, the number of first quarter blank sailings is 19,” Peterson said. The Harbor Trucking Association, which represents many trucking companies operating out of the southern California ports, said the coronavirus has had an “unprecedented effect on our members,” Weston LaBar, the association’s CEO, told HDT. “More than 50 blank sailings have caused marine terminal operators to reduce the amount of shifts they are open.

Coupled with appointments and restrictions for empty returns, motor carriers are unable to return empty containers and their yards are overflowing.” While fleets are absorbing the administrative and cost burden, others in the supply chain are “abdicating their responsibilities and expecting the motor carrier to solve the problems,” according to LaBar. “This situation is fluid, and in all honesty, we are uncertain of the long-term effects.

The longer we feel the impacts of the coronavirus, the more exposure there is for long-term economic effects. Also, the more challenging it will be to handle the cargo surges as a result of shippers trying to play catchup for lost time. We will need a collaborative approach to solve the issues at hand, both now and as we head towards recovery.”

One Fleet’s Experience

“It’s very tough right now,” said Robert Loya, vice president, CMI West, at drayage provider CMI Transportation. “The coronavirus is certainly hurting the community extremely hard, and when you add the onerous business practices that are being deployed, it just makes it even harder for us to do business.”

According to Loya, these “onerous practices” have to do with the way drayage fleets return empty cargo containers at the ports. After a shipment is picked up at a port, companies like CMI are given detention time to return the empty equipment after the cargo is delivered. On average, fleet have around 10 days to return the container before they are charged detention or per diem fees, which is determined through a contract with the steamship companies bringing goods into the ports.

With the lag time resulting from the lack of shipments coming from China, this has become an even bigger problem. “I’m going outside of my contractual free time because I can’t return that box,” said Loya, adding that while this usually happens seasonally every year, it has been amplified tenfold by the coronavirus outbreak. “We are fighting for appointments [to drop off containers] because it’s all first come, first serve. The virus has put us in a situation where we can’t even get appointments, and the gates are shut down because there’s no labor being ordered in the yard because there’s no vessels coming in.”

Every year, there is a lull in terms of how many ships come into ports like the Port of Los Angeles/Long Beach that is caused by factories and warehouses in China shutting down to celebrate Chinese New Year. This year, the number of ships entering the ports dropped even more because many factories and warehouses were shut down because of the virus. Even when the ban was lifted in late February and some plants restarted production, many of the raw materials needed were not available.

“As companies have been allowed to restart manufacturing, there is a shortage of raw goods,” Loya said. “There are also specific provinces in China who are not releasing labor to go back to warehouses and manufacturing plants because of the concerns of the virus. And the costs continue to mount for the trucking companies on all fronts.”

Precaution at the Ports

For port employees, there is also concern about potential spread of the virus, but through education and directives from the U.S. Coast Guard, many of the fears have been quietened.

According to Peterson, the ocean carriers, crews and marine terminal operators are all aware of the U.S. Coast Guard directives concerning the coronavirus outbreak. And as a cautionary measure, for ships arriving from mainland China, mariners are not allowed to leave the ships.

Because the virus is transmitted person-to-person, he said, “there’s no special cargo-handling required for normal shipments that haven’t been identified already with an issue.” However, he added, the Long Beach Department of Health and Human Services is closely monitoring the spread of the virus and have initiated additional steps to ensure continued vigilance and, “in the event it becomes necessary, response to any sign of COVID-19 in the city should it appear.” In Washington State, Call said a recent phone conference with the Center for Disease Control did little to give clarity to the issue of containment in that state. “We asked about additional screenings for people coming into the ports of entry – and not just water ports,” she told HDT. “But we were told they don’t have any information on efforts to do so and that they would have to get back to us. So we’re not sure about what’s being done or what future plans for containment are.”

“We are tracking information provided locally and from the CDC to effectively communicate up-to-date information through email and postings to our employees on proactive measures and practices to minimize the chances of exposure on contracting the virus,” said Dan Dan Wirkkala, president and CEO of Smokey Point Distributing, a flatbed/oversize hauler based in Arlington, Washington. “We continue to impress on  all our employees to stay home if feeling any signs of fever or congestion and seek medical attention as needed and with a doctor’s note, they will be paid for the time off. “Our operational structure is positioned to support our business if employees are off, but so far we have not seen any signs of the virus among our employee base for office/shop and drivers.”

On the East Coast

While California and Washington so far have been most affected, they’re not the only ones. The port of Baltimore’s container terminal had to reduce its operating hours because of declines in incoming cargo due to the international coronavirus outbreak, according to the Baltimore Sun[1].

Doug Wheeler, president and CEO of the Florida Ports Council, told HDT that Asian trade is particularly important to U.S. ports. “And that specifically includes trade with China, which is our #1 trading partner in waterborne cargo,” Wheeler added. “The Coronavirus has impacted the manufacturing sector in Asia, so we anticipate a reduction in Asian products coming in. But we have already seen rebounds in volumes and ship calls at Chinese ports, therefore we are not anticipating a dramatic reduction in Florida’s overall annual tonnage or cargo value.” Still, Wheeler said, Florida ports are monitoring the situation closely. “Florida’s ports are resilient and well equipped to handle a variety of emergency situations,” he said. “It’s also absolutely necessary that the ports continue business as usual, because they are critical links in the supply chain for areas in the Americas and Caribbean Islands, which rely on them to deliver food and supplies regularly.”

Economic Side Effects

While economic data has yet to point to significant issues in trucking, the side effects from the drop in cargo containers will result in weaker intermodal activity first and then a hit for trucking, according to FTR Chief Intelligence Officer Jonathan Starks.

“The real issue right now is whether the supply chain issues are going to be substantive enough to curtail significant amounts of manufacturing activity, [which would] then hit jobs and pay, which affects consumer sentiment and spending,” he told HDT. Additionally, Starks believes the emergency half-point interest rate cut from the Federal Reserve will not have any real impact on the economy. “It is mostly geared towards shoring up sentiment in the financial sector.

Low interest rates are meant to induce demand – but demand is not the issue; it is the supply side that is the worry. The U.S. has mitigated some of the impacts of the current crisis because of the reshaping of supply chains due to the trade war.” Currently, Chinese imports to the U.S. are down 19%, but overall imports are down just 1%.

And while China is still a major trading partner, a continued reduction in supplies for manufacturers will have major implications. Also, many of the diverted supply chains, especially those in other parts of Asia, still rely on China for source materials, he added. For now, it seems, truckers – like most Americans – can do little more than keep a close eye on the news and monitor events as closely as possible.

Certain areas of the country are already feeling an economic impact from the virus.

But it remains to be seen just how severe any economic lag will be – and how deeply into the North American interior the disease and its associated economic impact will reach.

References

  1. ^ according to the Baltimore Sun (www.baltimoresun.com)

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