Record West Coast Port Imports Cause Rail Congestion, Raising Supply Chain Concerns

Record-breaking import volumes at West Coast ports, fueled by diversions from East Coast and Gulf Coast labor disputes and ongoing issues in the Red Sea, are causing significant rail congestion. Thousands of shipping containers are piling up at ports like Los Angeles and Long Beach, leading to increased dwell times and raising concerns for retailers and businesses anticipating the crucial holiday season. While port officials maintain that vessel and trucking operations remain unaffected, the backlog on the rail lines presents a potential bottleneck that could ripple through the supply chain if not addressed effectively. This situation highlights the interconnectedness of global trade and the fragility of even the most robust supply chains in the face of unexpected disruptions.

Key Takeaways: West Coast Rail Congestion

• Record Imports: West Coast ports are experiencing unprecedented import volumes, exceeding previous records. This surge is largely due to diversions from the East Coast and Gulf Coast, exacerbated by problems in the Red Sea.
• Increased Rail Dwell Time: Containers are spending significantly longer at the ports waiting to be loaded onto trains. At the Port of Los Angeles, almost half of rail-bound containers are experiencing dwell times exceeding nine days, compared to a pre-surge average of four days.
• Holiday Season Impact: The congestion threatens to delay the delivery of holiday goods, potentially impacting retailers’ ability to meet consumer demand during the peak shopping season. Billions of dollars in holiday spending are at stake.
• Industry Concerns: Retailers, chemical companies, and logistics providers are expressing concern over the potential for further delays and disruptions to their supply chains. Companies are exploring contingency plans to mitigate the risks.
• Railroad Response: Freight rail companies are implementing strategies such as managing the flow of containers and investing in infrastructure improvements, yet the situation highlights the limitations of their current capacity.

Unprecedented Import Volumes Strain West Coast Rail System

The Ports of Los Angeles and Long Beach have witnessed unprecedented levels of imports in recent months. September 2024 saw the Port of Los Angeles handle 954,706 twenty-foot equivalent units (TEUs), its best September ever. Similarly, the Port of Long Beach moved 829,499 TEUs in September, marking its fourth consecutive year-over-year increase. These record numbers are partially attributed to the diversion of cargo from the East Coast due to labor disputes, with the ongoing issues affecting operations in the Red Sea further contributing to the surge. This influx of containers is overwhelming the rail system’s capacity to efficiently move goods out of the ports.

The Impact of Dwell Time

The most pressing concern is the dramatic increase in rail dwell time. At the Port of Los Angeles, the average time a container spends waiting for rail transport has jumped from four days to over nine days for nearly half of all containers. This significant increase is causing a backlog of approximately 20,000 rail containers currently sitting at the port, awaiting transport. While Port of Los Angeles Executive Director Gene Seroka assures that port operations themselves are not impacted, the prolonged rail dwell times represent a considerable bottleneck in the overall supply chain.

Port of Long Beach Remains Fluid

In contrast to the situation at the Port of Los Angeles, the Port of Long Beach, while also experiencing increased volumes, reports a less severe impact. While their average rail dwell time is seven days, Executive Director Mario Cordero emphasizes that port operations remain fluid and that they are not currently facing congestion. He notes a significant 26% increase in on-dock rail movement, indicating a level of adaptation to the increased volume. The difference in the reported impacts between the two ports may stem from differences in infrastructure, operational efficiency, or existing capacity.

The Looming Shadow of the Holiday Season

The rail congestion arrives at a particularly sensitive time—the peak shipping season leading up to the winter holidays. The National Retail Federation (NRF) projects robust holiday spending, with an estimated increase of 2.5% to 3.5% compared to 2023, potentially reaching $989 billion. This forecast, coupled with Amazon’s announcement of hiring 250,000 seasonal workers, underscores the immense volume of goods that need to be transported and delivered on time. The current rail congestion poses a significant risk to meeting this demand.

Holiday Goods at Risk

Data from Panjiva reveals a significant portion of the current cargo is, in fact, holiday-related. Between September 1st and October 14th, $231 million worth of goods categorized as “Christmas,” $78 million as “Holiday,” and smaller amounts for Hanukkah and Kwanzaa were identified at the Port of Los Angeles. These include items such as decorations, lights, trees and other seasonal products from retailers including Home Depot, Target, and Walmart.

Beyond Holiday Goods: Wider Supply Chain Impacts

The delays aren’t limited to holiday goods. The congestion is affecting a wide range of products, including sweaters for Kohl’s, home improvement materials, and even 92 containers of solar panels for BYD. The Alliance for Chemical Distribution highlights the critical role of the Los Angeles and Long Beach ports in importing essential chemicals from China, including those used in various products ranging from cleaning supplies to beverages. Delays in these shipments could lead to shortages and production disruptions across multiple industries.

Retailer Concerns

The National Retail Federation (NRF) acknowledges the severity of the situation. Jon Gold, vice president of supply chain and customs policy at the NRF, stresses the importance of maintaining cargo fluidity and working collaboratively to prevent further delays. Logistics managers report average dwell times for containers from vessel to rail exceeding two weeks, with some cases reaching four. This delays impact the efficiency of even the most comprehensive processes, forcing businesses to take additional measures.

Railroad Responses and Industry Adaptations

Freight rail companies are acknowledging the challenges and implementing measures to address the increased volume. Union Pacific is utilizing its reserves of employees, locomotives, and railcars to manage the situation, while also collaborating with customers to regulate the flow of containers into the ports. BNSF Railway, which experienced record on-dock volumes in the first half of 2024, points to external factors like the lithium battery fire at the Port of Los Angeles as contributing to some of the delays. However, despite these efforts and investments in infrastructure, the ongoing challenges highlight the limitations of the current rail network’s capacity.

Innovative Solutions and Contingency Plans

Logistics companies like ITS Logistics are implementing contingency plans to minimize the impact of rail delays. They prioritize moving containers directly from vessels to trucks, bypassing the congested rail terminals. This strategy, while costly, ensures a more timely delivery for their clients. Other companies like DHL are advising their clients to explore alternative routing options, such as shifting cargo to East Coast ports, though this remains a complex decision considering the ongoing labor negotiations on the East Coast.

Looking Ahead: Uncertainties and Potential Solutions

The future remains uncertain. The early Lunar New Year, the upcoming US presidential election, and the overall strength of the economy are all factors that could influence future import volumes. The potential for new trade tariffs under a potential Trump presidency adds another layer of complexity. Addressing the current rail congestion requires a multifaceted approach involving improved coordination between ports, railroads, and logistics providers, along with continued investment in infrastructure and technology to enhance efficiency throughout the supply chain. While immediate solutions are being actively pursued, the long-term sustainability of the current system under potential future surges remains a crucial question for stakeholders across the supply chain.