California grapples with port congestion, supply chain kinks

The pandemic economy has catalyzed changes for California businesses and consumers. Take the impacts of the state’s system of ports that connect with the movement of goods to 40 million residents. 

Assemblymember Patrick O’Donnell and state Sen. Lena A. Gonzalez, both Long Beach Democrats, are co-chairs of the Assembly and Senate Select Committees on Ports and Goods Movement. In November, the two legislators convened a joint informational hearing of leaders in and out of private industry to focus on short-term and long-term solutions to the crisis of port congestion and supply chain disruptions.

O’Donnell reflected on the past three months. “The congestion at the San Pedro Bay Ports (Los Angeles and Long Beach) is part of a worldwide supply chain crisis to address on numerous levels,” he said.

“The issues highlighted in November persist. Empty containers piling up at warehouses and truck facilities continue to occupy chassis supply, without which nothing can move.” — Chris Shimoda

Production based abroad, such as the semiconductor industry in South Korea and Taiwan, requires supply chains with unique requirements to move goods from producers to consumers. For instance, South Korea is on a peninsula and dependent on ships for semiconductor exports from companies such as Samsung, which operates the biggest such plant in the world, according to Lewis Black, director, president and CEO of Almonty Industries, a global raw materials development company that mines for tungsten—a vital material in electronics and semiconductors.

Thus, global goods circulation requires knowledgeable sources to help lawmakers to get a handle on the scope of the current situation.

“Our informational hearing on Nov. 3 gave state lawmakers the opportunity to hear straight from the experts and to elevate short-term and long-term solutions,” according to O’Donnell. “In my view, one of the most pressing issues is the lack of storage space for truck chassis and containers. Slow progress is being made to address this bottleneck.”

Just ask Chris Shimoda, senior vice president for government affairs with the California Trucking Association, part of the hearing that O’Donnell and Gonzalez co-chaired. 

“The issues highlighted in November persist,” Shimoda told Capitol Weekly. “Empty containers piling up at warehouses and truck facilities continue to occupy chassis supply, without which nothing can move. This congestion continues to cost California exporters, importers, manufacturers and consumers hundreds of millions of dollars a month.”

State politics and policies are necessary but insufficient to address all of the economic interests and forces involved in the current “new normal” of port congestion.

How to address congestion and disruption of global trade as they play out in the Golden State? One factor is a need for increased capital investment for semiconductor plants that take three years to build. That is a long-term process, Black noted.

Further, O’Donnell also underscores the centrality of capital investment.

“A longer-term issue involves making infrastructure enhancements,” he said. “Since the hearing in November, the federal infrastructure package passed which will give vital resources to our ports. I am also working to include additional port investments in the upcoming state budget.”

As part of the global economy, California is not alone facing port congestion and goods transportation issues, according to Black. It follows, therefore, that state politics and policies are necessary but insufficient to address all of the economic interests and forces involved in the current “new normal” of port congestion and supply chain disruptions.

“The union (International Longshore Workers Union Local 13) is encouraged by the investments in on-dock rail, which is the number-one way to relieve congestion in the long term.” — Ramon Ponce de Leon.

One driving force that California lawmakers are responding to is the rise of e-commerce consumer demand during the pandemic. The proximate cause is consumers changing their shopping behaviors, preferring to purchase goods at home instead of malls. Another factor of note is a reduced workforce (layoffs and quits). Add a highly transmissible Omicron variant of the coronavirus causing labor force changes that are in part pushing employers to pay workers higher wages. 

This is a “new normal,” ready or not, economically speaking, with supply and demand in upheaval. The dust has yet to settle, causing impacts big and small. Take ground transit in California. 

“Chip shortages are impacting new truck manufacturing which is limiting supply and increasing used truck costs,” according to Shimoda. “This is compounded by other parts necessary for repair being short, all of which is cutting into available trucking capacity.” 

On a related note, electric vehicles require more semiconductors than those running on fossil fuels, Black says. Consumer demand for EV is rising. That is another reason for the current chip shortage disrupting business as usual in the Golden State.

Perhaps surprisingly, labor-management relations offer a window into how the current crisis has delivered collaborative outcomes. Ramon Ponce de Leon is the president of International Longshore Workers Union Local 13, and a speaker at the state Capitol hearing last November. 

“The union is encouraged by the investments in on-dock rail,” he told Capitol Weekly, “which is the number-one way to relieve congestion in the long term. ILWU workers continue to move cargo every day despite the pandemic hurdles, and the carriers’ removal of longstanding containers from the docks has given dockworkers some of the room we needed to keep moving cargo at historic rates.”

Meanwhile, California exports such as farm products have markets abroad.

Thus, port congestion was the focus of a joint hearing on agriculture and goods movement at the state Capitol on Feb. 2.
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Editor’s Note: Seth Sandronsky report regularly for Capitol weekly. Contact him at [email protected]