Port of LA cargo rail congestion hits two-year high ahead of holidays

Record imports over the last several months at West Coast ports, driven by the recent East Coast and Gulf Coast strike diversions and ongoing Red Sea issues, are leading to congestion on the rails, as holiday goods and everyday items pile up.

Almost half of the containers bound by freight rail out of the Port of Los Angeles are waiting nine-plus days to get out of the port and onto the rail.

Before the August and September container surges, the average rail dwell time, or how long a container sits at port, for the San Pedro Basin, which includes the Port of LA and Long Beach, was four days.

In September, the Port of Los Angeles moved a total of 954,706 twenty-foot equivalent units, or TEUs, making the month its best September ever. At the port’s monthly cargo briefing Friday, Executive Director Gene Seroka told CNBC there are currently 20,000 rail containers sitting at the port waiting to be loaded out, and he is speaking with the railroads on a daily basis about the increased dwell times.

But he stressed that the rail congestion is not leading to any additional issues at the port as far as vessel and trucking operations. “This is not impacting port operations,” said Seroka. “We want to make sure we improve on all port operations. The railroads continue to be our focal point.”

Seroka said he is monitoring three key factors related to future container growth and port ability to move all of the cargo efficiently: early Lunar New Year, the U.S. presidential election, and the strength of the economy, which currently continues to look strong based on the recent port volume data.

“October is shaping up to be another strong month,” Seroka said. “We see no precipitous signs of a pullback. We are looking at the mid-800-thousand [TEU] range. We have an early Lunar New Year. With tariffs, we may see an uptick of cargo in early to avoid those extra costs depending on the presidential outcome, and unemployment claims are down.”

Republican presidential candidate former President Donald Trump has continued to talk aggressively about new trade tariffs if he wins the election.

At the Port of Long Beach, the rail dwell times for containers are seven days, but the port is not experiencing congestion, Executive Director Mario Cordero told CNBC.

“Given our historic number of TEUs moving through [the Port of Long Beach] for the last three months, the current rail dwell is not of immediate concern,” Cordero said. “Port of Long Beach is not experiencing any congestion or bottlenecks, our operations are fluid. We are in a good position to receive continued record cargo given our current capacity.”

Cordero said there has been an increase of approximately 26% in on-dock rail movement.

In September, the Port of Long Beach moved 829,499 TEUs. September marked the port’s fourth consecutive monthly year-over-year cargo increase, with holiday-related products driving the increase.

Retail and chemical companies concerned

Matt Shay, CEO of the National Retail Federation, told reporters at a holiday sales forecast briefing this week that it expects robust numbers for the rest of the year. “[We] feel very good where retailers are in the inventory cycle and meeting consumer demand,” he said.

The National Retail Federation forecast is for winter holiday spending to grow between 2.5% and 3.5% over 2023, consistent with its annual sales forecast, and reaching as high as $989 billion in total holiday spending in November and December, slightly above last year’s level. Amazon recently announced its plan to hire 250,000 additional workers for the holiday season, the same seasonal hiring level as last year.  

Global data company Panjiva, which tracks bills of lading — the digital receipts of cargo containers — said that between Sept. 1 and Oct. 14 at the Port of Los Angeles, $231 million worth of products were identified as “Christmas,” $78 million as “Holiday,” $7.6 million as “Hanukkah” plus $1.3 million as “Chanukah,” and $755,000 as Kwanzaa. Items include household decorations, lights, trees, candles, menorahs, nutcrackers, and wreaths. Some of the companies listed with items under these categories include Home Depot, Target and Walmart.

Holiday items are not the only products in the containers. Sweaters bound for Kohl’s, home improvement products, and 92 containers filled with 1,840 packages of solar panels for Chinese company BYD are also among the cargo coming through the port.

Eric Byer, CEO of the Alliance for Chemical Distribution, said the ports of Los Angeles and Long Beach are critical ports for key chemicals that come from China on a daily basis, including citric, sulfuric and ascorbic acids.

“The chemicals are critical ingredients in everything from household cleaning products to vitamins to soft drinks and energy sports beverages. With increased volumes coming into these ports as a result of the East Coast port strike, shipping delays have increased forcing ACD members to reroute shipments to other ports on the West Coast and the southern U.S.,” Byer said.

Jon Gold, vice president of supply chain and customs policy at the National Retail Federation, told CNBC the increased rail dwell times at the West Coast ports are concerning for retailers that are at the tail end of the all-important peak shipping season for holiday merchandise.

“We recognize there has been a significant increase in import volume through the ports over the past few months,” said Gold. “Retailers are working to get their cargo as quickly as possible. It’s vital that stakeholders work in a concerted effort to maintain cargo fluidity and move cargo out of the ports to avoid further delays.”

Freight rail lines make changes for record volumes

A spokesperson for Union Pacific said the increase in containers has had an impact. “Union Pacific is using its buffer of resources (employees, locomotives and railcars) to manage double-digit international intermodal volumes from the Ports of Los Angeles and Long Beach,” the spokesperson said, noting that the port of LA alone reported a 37% increase in July and 16% in August compared with 2023.

“We also continue to see a shift in traffic from the East Coast. To balance this, we’re working with customers to temporarily manage the flow of containers into LA and Long Beach to keep the supply chain fluid,” the spokesperson added.

A BNSF Railway spokesperson said the first half of 2024 was a half-year record for on-dock volumes at BNSF, and the fastest the company reached 1 million lifts at on-dock terminals within a year.

“We have run into a few challenges in recent weeks outside of our control, including diverted volumes from the East, and a lithium battery fire that forced the ports to temporarily shut down,” a BNSF spokesperson wrote in an email. “Disruptions such as these can take days or even weeks to unwind, and we are doing our best to work through them.”

The BNSF spokesperson added that the network “is speeding up” but must also rely on interchange partners, terminal operators, and dray providers to similarly execute on their operating plans to keep the entire point-to-point network running fluidly.

“BNSF has been able to handle these record volumes coming into the ports due to the numerous steps we have already taken in preparation for the busy season, including investments we’ve made in capacity along our Southern Transcon [main line of the BNSF Railway between Los Angeles and Chicago], adding more than 100 miles of main track and 8,000 additional parking spaces within our intermodal hubs.”

“We are also departing full-length westbound trains from Chicago on schedule even without a full load of containers in order to get needed rail cars back to the ports. … Our container yard capacity is ready at key destination facilities to unload trains,” the spokesperson added.

Supply chain executives say shipping customers are worried

Logistics managers tell CNBC average dwell times for a container being unloaded from a vessel to being loaded onto rail is about two weeks at Los Angeles and Long Beach. In some isolated cases, dwell times are up to four weeks, they say. 

Paul Brashier, global logistics vice president of ITS Logistics, told CNBC it is continuing with the contingency plan in place since the Red Sea diversions began, but avoiding potential rail issues at the port as much as possible.

“With no final resolution to the ILA strike and Red Sea conflict, we expect diversion volumes to continue,” Brashier said. “The most effective and cost-effective way for us to move our clients’ freight is to bypass the initial rail terminal at the port. We grab the container at the port before it gets to the rail, unload the rail ocean container, and reload the freight into a truck. It is then transported further inland into our client’s supply chain.

While the ILA, East Coast and Gulf Coast ports ownership reached a tentative deal on wages, the issue of automation remains to be resolved by a January deadline for a completed deal, and remains a sensitive issue in negotiations on which the parties have been far apart.

Geotz Alebrand, head of ocean freight Americas for DHL Global Forwarding, said the extended dwell time at the West Coast ports, particularly the LA port, is a concern for many customers.

“The primary factor contributing to this issue is the insufficient supply of rail cars returning to the West Coast,” said Alebrand. “As a result, there could be delays ranging from 5 to 15 days, depending on the specific terminal and whether the cargo is being transported by rail or truck, as well as the final destination ramp.”

Alebrand said DHL is advising clients to consider alternative strategies to mitigate these delays. One viable solution is to reroute cargo to the East Coast ports.

“For those with Intra-Point Intermodal (IPI) destinations, it is particularly crucial to account for the potential longer dwell times,” Alebrand said. “However, it is worth noting that some customers are hesitant to make this shift due to the ongoing negotiations surrounding the East Coast labor contract,” he added.

Both Norfolk Southern and CSX move rail freight out of the East Coast ports. Both rails benefited from diverted West Coast rail-bound containers during Covid to try to avoid lengthy delays.