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‘It’s like Lego bricks’: Shippers and consumers feel affects of overflowing ports

A lack of storage space in distribution hubs on the fringes of Toronto, Montreal and Vancouver is one reason

By Christopher Reynolds 

Bob Ballantyne broke a cord on his blinds in early July, and his repairman in Ottawa still hasn’t been able to replace the snapped part.

“He says, ‘You know, supply chain issues. I can’t get the string that I need to fix it.’”

Ballantyne isn’t alone. The pandemic sent shockwaves through the global supply chain and the backlogs are mounting even as freight volumes fall in North America this year.

The delays stem from several choke points along the chain, including backed-up warehouses, staff shortages and rail capacity. Ultimately the longer wait times, and extra costs, are being passed along to consumers.

In the first half of 2022, container volumes at the Port of Vancouver dropped seven per cent from the same period a year earlier. But containers sat on its docks for nearly six days on average, almost twice as long as in 2019 and a 41 per cent increase from 2021.

That “dwell time” rose higher in July, to more than six and a half days. Meanwhile, cargo vessels sat at anchor for 9.6 days on average before docking at the country’s largest port as a result of the buildups last month, more than twice as long as they waited last year.

“It’s like Lego bricks,” said Robert Lewis-Manning, president of the B.C. Chamber of Shipping, of shipping containers. “They’re piled up and there’s just no more place to put them.”

In Montreal, Canada’s second-largest port, containers wait four times longer than the 2019 average, and vessel turnaround is similarly well above both 2019 levels and those from a year ago.

A lack of storage space in distribution hubs on the fringes of Toronto, Montreal and Vancouver is one reason.

“Warehouses in Ontario and Quebec are largely full,” said Lewis-Manning. “The problem is, there’s something behind it that can’t get through to where it needs to go. And maybe it is a critical part for a manufacturing operation.

“Ultimately the consumer will pay the price for that,” he said.

Storage fees, contract extension penalties and “demurrage” fees — issued by a shipping line when freight exceeds the time allotted at a terminal — eventually show up in the retail price tag, on top of higher freight rates and overtime wages for those working on the backlogs.

Ironically, the delays brought on by full warehouses are partly the result of importers’ response to previous supply-chain disruptions.

“When people anticipate a shortage or capacity constraint, they overcorrect. And that actually amplifies the challenge,” Peter Xotta, head of operations at the Vancouver Fraser Port Authority, said, citing what he called a “bull-whip effect.”

“If the goods show up two months later than when they’re anticipated, you might be missing that window for these barbecues, for parasols, for garden furniture that you were looking for in June,” said Daniel Dagenais, vice-president of operations at the Port of Montreal.

Once the sales window is over for these seasonal products, they either need to be physically stored until the following year or heavily discounted.

Canadian Tire Corp. Ltd. said earlier this month that its merchandise levels shot up 18 per from a year earlier, which means it has less flexibility for storing off-season items.

Shippers and marine carrier operators see rail as a critical bottleneck.

Grain volumes were down last year due to a drought, but rail companies “still had problems,” said John Corey, president of the Freight Management Association of Canada.

The grain yield — often the biggest source of commodity revenues for Canadian National Railway Co. and Canadian Pacific Railway Ltd. — is expected to return to the historical average this year, raising questions about what other shipments might be sidelined to accommodate the larger harvest.

“The amount of rail capacity that there is with various rail lines, that really is what’s making a big impact,” said Xotta.

Stakeholders from wheat and canola exporters to lumber producers are worried, as demand for Canadian grain, potash and coal surges due to shortages caused by the Russian invasion of Ukraine.

“All those Asian imports that are coming in by container and the largely bulk exports that are headed to Asia … are all competing for that same rail service,” Lewis-Manning said.

“I think we’re going to see a real mess on the West Coast.”

A dire dearth of truck drivers marks another snarl in the chain. The sector saw record vacancies in the first quarter, with 25,560 unfilled driver positions between January and March, according to Trucking HR Canada.

And spillover from heavily backlogged American ports such as Los Angeles and nearby Long Beach further adds to port congestion, while labour shortages at warehouses also gum up the cargo flow.

“You get to a point where one more drop and you start to overflow. And we have started to overflow,” said Chris Hall, CEO of the Shipping Federation of Canada.

Canada’s two main rail lines have been pouring money into network upgrades and new railcars while scrambling to hire workers after laying off thousands in the first year of the pandemic.

CN and CP hope to hire more than 3,800 workers this year, including some 1,850 already on board since Dec. 31. But the labour market — especially for train conductors and engineers — is tighter than it’s been in decades and it takes up to nine months to train some crews.

CN spokesman Jonathan Abecassis said the railway has set up temporary storage capacity in Montreal and Toronto, as the Vancouver port did in February. And CP Rail CEO Keith Creel assured analysts on a call last month the company is flexible: “We have capacity. We’re not holding any freight at West Coast ports or East Coast ports to pace into our inland terminals.”

That’s cold comfort for Ballantyne, still waiting for a repair to his blinds. The last he heard, the component might be replaced by next month. But there are no guarantees.

This report by The Canadian Press was first published Aug. 22, 2022

Banner image via The Canadian Press