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Transmission: Automotive shippers spared from worst of port congestion

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This is Transmission, a twice-weekly newsletter assembled to chronicle the seismic shift in auto supplier networks as the industry goes cross-border and electric.

Are Eastern ports used by automotive shippers experiencing an increase in import volumes as L.A experiences congestion?

Ports across the country are congested. December is typically a softer month for seasonal ocean import volumes, but the COVID-19 pandemic has distorted consuming spending patterns, and goods spending has grown compared to services. Pair that with the usual increase in spending around the holidays, and we get a logistical nightmare that has a ripple effect on U.S. ports. 

Imports to the Port of Los Angeles, the nation’s #1 container port, rose 25% year-on-year, with Long Beach up 30.5%. “Congestion is getting critical in [Los Angeles and Long Beach] ports,” said Jason Flores, VP of ocean product, marketing and development at Air Tiger Express in a recent post.

“We are already seeing the booking demand skyrocket in Asia for East Coast space,” Flores wrote. Shippers are looking to speed up delivery and avoid long wait times by utilizing space on the East Coast. As a result, import volumes at eastern ports are on the rise.

“Our fourth quarter is shaping up to be the best in our history,” commented Port of Houston Executive Director Roger Guenther. According to former Trailer Bridge CEO John McCown, who analyzes container port trends for the top ports across the country, Houston’s loaded import container volumes in November increased 20.7% year-on-year. Houston isn’t the only port experiencing the heightened imports. The Port of Virginia has seen imports increase 21% YoY in November. While the Port of New Jersey/New York rose 29.5% y/y.

Typically, the automotive industry uses ports on the East Coast since they’re located closer to the heart of the auto supply chain network, which runs from Ontario through the Southeastern U.S., ending in Central Mexico. Ports in Charleston, Mobile, and Savannah are used by automakers importing components from Europe and Asia. Given the congestion in L.A and the rise of import volumes in the East, what’s the story at these ports?

(Chart: Freightwaves SONAR. The Port of Savannah is experiencing a rise in import volumes relative to last year.)

One of the biggest auto companies that both the Port of Charleston and the Port of Savannah serve is Mercedes-Benz. The Port of Savannah has strong TEU volumes and saw a 24.6% increase in November y/y. At the Port of Charleston, aside from the normal volatility of imports, nothing stands out that points to a significant rise in imports or congestion. The Port of Mobile, who serves Hyundai, tells the same story. While Savannah may be experiencing a higher volume of imports, there have been no major delays reported. To make a long story short, it doesn’t look like the eastern ports used by automakers are seeing monumental delays, which is good news for OEMs and suppliers relying on on-time deliveries.  

(Chart: Freightwaves. The Port of L.A has seen a 25% increase in imports y/y. 2019-Green, 2020-Blue)

Asian OEMs and suppliers like Hankook Tires, Toyota, and Subaru primarily use the Port of Los Angeles. Unlike Charleston or Mobile, L.A. is getting nailed with higher container volumes y/y while simultaneously dealing with the delayed peak season. The port has a line of ships just waiting to dock, with the average vessel sitting anchored for 4 days in December. These delays could see auto component delivery times pushed back as well.

U.S. charging infrastructure holding back electric buses 

With all the hype that electric vehicles bring, there is one vehicle that shouldn’t be forgotten—the bus. According to the U.S Department of Transportation, the amount of federal, commercial, and school buses operated in total around 884,000 buses back in 2019. The auto industry is increasingly moving towards cleaner transportation and electric buses are starting to gain more traction.

(Image: Volvo. The 145 buses in Gothenburg will cut CO2 emissions by 14,500 tonnes and nitrogen oxides emissions by approximately 8,000 kg per year.)

Over in Sweden, Gothenburg was a testing ground for Volvo Buses’ first all-electric vehicles back in 2015. 5 years later, Sweden’s second largest city has added 145 new Volvo 7900 Electric Articulated buses to the transit fleet with the goal of every city bus being electric by 2030. The city has seen a significant reduction in noise levels and carbon emissions. 

Gothenburg’s key to success lies in the infrastructure that supports the transit system. Charge stations are placed along routes allowing buses to get the adequate charge they need to operate. This is something that the United States is still figuring out. Dense urban areas present difficulties in building new infrastructure and, not to mention, is costly. 

As transit operators and governments look to add electric buses to their fleets, one company to pay attention to is Arrival Ltd. The recent startup is backed by Hyundai and BlackRock Inc. and prides itself in its scalable model. CEO Denis Sverdlov stated, “There are more than 560 cities in the world [that] have a population of over 1 million people, and each of these cities could have a microfactory producing 10,000 vehicles specifically tailored for the needs of that market.” Microfactories are cheaper to build than large scaled plants and allow Arrival to essentially sell electric buses at the same price of gas-powered equivalent buses.

Outside public transport, the classic yellow school bus is starting to operate differently as well.  School districts across the country are beginning to focus on acquiring these all-electric buses to promote clean energy, save on operating costs (since there are fewer parts in an electric engine), and protect students from the harmful effects of exhaust that emit from fossil fuel engines. Since school buses run routes in the morning and in the afternoon, they have more idle time and can charge in centralized locations. The Twin Rivers Unified School District in Sacramento, CA,  is leading the way for districts across the country aiming for zero-emission fleets, by operating 40 electric buses. Bluebird, the top bus manufacturer in the U.S, has seen electric bus sales increase by 250% in 2020. 

To summarize, the electric bus market is beginning to take stride in the United States. Just like EVs, countries need to prioritize building the right infrastructure to support the electric buses that are being produced. 

Industry News

  • The UK auto industry is bracing for large losses as a no-deal Brexit looms larger. The industry could lose up to $74 billion.
  • Volkswagen has lost in a top European Union court ruling over VW’s use of technology to bypass diesel engine pollution tests.
  • Canoo unveiled two electric delivery vans that will be available in 2022. The futuristic-looking vans boast a 230 mile range and 450 cubic feet of storage space.

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