Crowds of 18-wheelers are the clearest sign of brisk activity at the port terminals of Port Newark-Elizabeth in northern New Jersey, defying talk of a US economic slowdown.
Last week, the Port of New York and New Jersey reported that its June 2022 volume was the second-highest on record, capping a hot semester that topped the first half of record-breaking 2021 by 11.4 percent.
“Volumes continue to be extremely strong,” said Michael Bozza, associate director of commercial development for the Port of New York and New Jersey, who nonetheless expects activity to slow later in 2022, in part due to inflation.
Bozza said warehouses, freight rails and other supply chain nodes remain “stressed” and are at or near capacity. Some of the cargo is being held for later in the year as importers shift from a “just-in-time” strategy to “just in case,” he said.
A key report on Thursday could show that the US economy technically entered recession in the most recent quarter. But the nation’s ports tell a different story.
“Are we seeing an economy that screeches to a halt? No, we don’t,” said Phil Levy, chief economist at Flexport, a trucking company. “We see continued imports. We see continued consumption.”
This ongoing spate of imports — which is also playing out in other major US container ports like Los Angeles and Savannah, Georgia — is one of the reasons logistics experts remain wary of the state of the US supply chain, even though the ports are no longer confronted with it the residue of last autumn.
New problems sometimes surface quickly, like last week when trucker protests over a newly introduced California law effectively halted shipments at the Port of Oakland, another of the country’s larger container ports.
Normal operations have since resumed, but the incident underscores the fragile state of the overburdened US infrastructure during the pandemic.
“There’s not much room for maneuver in the system if something goes wrong,” said Sal Mercogliano, a marine historian at Campbell University in North Carolina.
“While the economy is slowing and inflation is rising, people are still buying a lot.”
– rail bottleneck –
Supply chain concerns in the United States peaked last fall, when dozens of stranded ships in the ports of Los Angeles and Long Beach sparked worries about a spartan holiday season.
These fears turned out to be exaggerated. To keep goods secure, retailers took extraordinary measures, making greater use of air freight and, in some cases, chartering their own ships to keep shelves stocked.
Most major ports no longer have large backlogs, but there are other problems in the system.
Gene Seroka, executive director of the Port of Los Angeles, recently called delays in freight traffic a concern. He pointed to a surplus of around 20,000 rail containers stuck at the facility.
“We must act immediately to avoid a nationwide shutdown,” Seroka said two weeks ago.
At least part of the problem in rail travel stems from downsizing at rail freight companies like CSX and Union Pacific in the years immediately prior to the pandemic.
“Rail is a big reason things are still stalling,” said Jason Miller, a professor of supply chain management at Michigan State University, who notes that total rail freight employment is about 40,000 down from 2016 levels.
The unresolved status of the work talks between railway companies and railway workers’ unions also increases the uneasiness. Both sides could not agree on a contract to monitor wages, health care and working conditions.
On July 15, President Joe Biden blocked a railcar strike for at least 60 days and signed an executive order establishing arbitration to resolve the dispute.
Another open labor issue is the West Coast longshoreman contract, which expired at the end of June. Again, there has been no strike as the two sides continue negotiations.
East Coast ports like New York and others on the Gulf Coast have picked up additional business from shippers concerned about the risk of strikes, as well as a repeat of last fall’s troubles in Los Angeles and Long Beach.
Bozza estimates that about seventy percent of the new volume at ports in New York and New Jersey in 2022 will be displaced West Coast cargo.
Despite these problems, Miller doesn’t expect a repeat of last fall’s crisis, saying, “We’re in a better place than we were eight or nine months ago.”
“There is a lot of uncertainty about how much spending power the US consumer has this holiday season,” said Miller, who pointed to China’s zero-tolerance policy on Covid-19 as another big wildcard for the supply chain.
However, Flexport’s Levy notes that while port delivery times are improving, they are still taking much longer than they were in the pre-pandemic era.
“We still have significant supply chain difficulties,” Levy said. “Lately we’ve seen ports perform better and rail worse.”
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