Missing the Boat on COVID

Barry Sheehy did something in Monday’s Chronicle Herald that I would not have believed possible: he wrote an opinion piece (“Atlantic Canada missing the boat on U.S. port-expansion frenzy“) about congestion at US ports without mentioning COVID.

Sheehy — described as an author, historian businessman, veteran and part-time Gabarus resident who is “involved with” Sydney Harbour Investment Partners (SHIP) — looks south of the border and sees exactly the same thing he’s been seeing since he first brayed his way onto our editorial pages.

Here he is in the Chronicle Herald and Cape Breton Post on 29 October 2014 — almost seven years ago to the day:

On the East Coast, billions are being spent in Savannah, Jacksonville, Norfolk and New York-New Jersey, all in anticipation of larger container ships.

Here he was on Monday:

American ports are spending extraordinary amounts of money expanding port infrastructure.

We are talking tens of billions of dollars. Just look at the ports of New York-New Jersey, Virginia, Charleston, Savannah, Jacksonville, Miami and Houston. Each of these ports is investing $2 billion to $4 billion in new facilities, logistics centres, on-dock rail and harbour deepening.

Back in 2014, his case was that, despite their spending, these American ports would be unable to handle the “new super-sized ships” headed their way — by his reckoning, only Halifax, Sydney, Norfolk and Baltimore had the depth to receive them.

Today, his argument is not that the American ports can’t handle the larger ships but that the sheer volume of expected container traffic “represents an extraordinary economic opportunity for Maritime Canada,” by which he means “Sydney.”

 

Supply-chain woes

So, a couple of things.

First, Sheehy’s “involvement” with SHIP is as a founder of the company and one of two principals (the other being CEO Albert Barbusci) of the Novaporte container terminal project. In other words, he is someone who stands to benefit materially from the success of this project. This should be flagged clearly and his analysis of anything touching on the project judged accordingly.

Barry Sheehy Novaporte Bio

Second, his latest Herald piece insists upon the “avalanche” of container traffic clogging US ports without, as I noted at the outset, any reference to COVID.

But literally every feature of the current situation he discusses can be linked, in one way or another, to the ongoing pandemic. Watch, I’ll do it.

Sheehy writes:

Trade on both coasts is booming beyond anyone’s expectations or projections. Ports like Charleston and Savannah are hitting record after record in volume. Savannah hoped to reach five million containers by 2025; it looks like this target may be hit this year.

Because of COVID, as the UN Conference on Trade and Development explains, when the pandemic hit, there was an initial downturn in shipping and then:

…changes in consumption and shopping patterns triggered by the pandemic, including a surge in electronic commerce, as well as lockdown measures, have…led to increased import demand for manufactured consumer goods, a large part of which is moved in shipping containers. As at the third quarter of 2020, lessening of lockdown measures and varying speeds of recovery worldwide, as well as stimulus packages supporting consumer demand, inventory-building and frontloading in anticipation of new waves of the pandemic, contributed to leading to a further increase in containerized trade flows.

Sheehy continues:

This boom has stretched Savannah’s capacity to bursting. They must expand or blow up. The same story is true all along the U.S. Eastern Seaboard.

Because of COVID.

Savannah, Georgia TV station WTOC asked Michael Toma, an economist with Georgia Southern, about the backup of vessels in port on October 14 and he said:

Low vaccination rates in Southeast Asia means product constraints at a time when higher vaccination rates in the U.S. and the holiday season have created a surge in demand.

And that’s led to shipping delays.

MSN reported that:

A multitude of factors have combined to cause the global shipping bottleneck. In August, the Chinese port of Ningbo, one of the world’s largest, was shut down for two weeks to stamp out a COVID-19 outbreak among dock workers. Ports around the globe are still feeling the effects of this delay.

Once the port resumed operation, “there was a huge wave of ships that came rushing to the East Coast,” said Port of Boston director Michael Meyran.

This is one reason for the vast backups outside the ports of Savannah, Ga., Charleston, S.C., and New York.

Here’s Mario Cordero, executive director of the Port of Long Beach, California — the largest container port complex in the United States — explaining the supply-chain “crisis” to Fox Business:

Cordero noted that there is a “confluence of factors” as to why the situation developed into a “crisis,” explaining that the disruption to the supply chain is “very much” due to the COVID-19 pandemic.

He explained that there have been “delays from the cargo coming from China,” pointing out that there are “major ports” in China and when one COVID-19 positive worker is detected, terminals are shut down.

You literally cannot find an article about US port congestion that does not at least mention COVID, unless that article was written by Barry Sheehy.

Shipping containers, Port Elizabeth, NJ, 2004

Shipping containers, Port Elizabeth NJ, 2004. (Photo by Captain Albert E. Theberge, NOAA Corps (ret.), Public domain, via Wikimedia Commons)

And he continues:

To make matters worse, there are not enough trains or trucks to move cargo inland and stuff is piling up on docks. The entire logistics system is stretched to the limit.

Because of COVID.

The increase in online ordering during the pandemic has, according to CNN, “sent demand for delivery truck drivers through the roof.” (And higher wages have not attracted more people to the job, instead, they’ve allowed many truckers to cut their hours and spend more time at home.)

And railroads, according to Forbes, have “a labor shortage of their own” — they furloughed thousands last year when COVID first hit and workers have been “slow to come back.”

But when Sheehy asks, rhetorically, “Wonder why products are in short supply and more expensive?” His answer is:

Big retailers are being forced to abandon lean inventory strategies in favour of having a year’s supply of goods on hand. This is causing shortages of warehousing space and driving up prices.

BECAUSE OF COVID. Does the man read nothing before he writes? Buckets of ink have been spilled on the effect of COVID on the Just-in-Time supply chain model. This isn’t to say there aren’t other factors at play — Forbes, for instance, notes the role weather has played in disrupting the supply chain — but discussing shipping in 2021 without mentioning COVID is like discussing the entry of women into the workforce in the late 1930s without mentioning the war.

 

Willful ignorance?

I have to assume Sheehy is aware of the pandemic, so his refusal to mention it is strategic. Suggesting the congestion is due to COVID raises the possibility that, once the pandemic is over, the congestion will ease. In fact, the Georgian economist mentioned earlier said as much:

The expectations are that we will have these logistic difficulties in the supply chain extending well into 2022 It may even be into the second half of the year before things start to normalize.

Others are less optimistic. Forbes ran a September story headlined, “No End in Sight for The COVID-Led Global Supply Chain Disruption,” which said — well, it’s all in the headline. The story got deep into another contributing issue ignored by Sheehy, the shortage of shipping containers.

Many containers that carried millions of masks to countries in Africa and South America early in the pandemic remain empty and uncollected because shipping carriers have concentrated their vessels on their most profitable Asia-North America/Europe routes. In other words, there are fewer containers in circulation, creating an imbalance in usable supply and demand.

This has contributed to “spiraling costs for ocean freight” (Bloomberg reported in April that contract rates for 40-foot containers between Asia and New York were coming in around $2,500 to $3,000 — 25% to 50% higher than a year ago) which could persist for the next year (or more).

I’m not saying months of disruption will be easy (although it will give us time to wonder how much we really need that stuff we’ve ordered from China), I’m just questioning whether a crisis expected to end in 2022 is an argument for a port that is — brace yourself — set to begin operations in 2025:

 

Novaporte screen capture, "Beginning Operations in 2025"

Source: Novaporte website

(Yes, the boys have revamped their website, but there’s too much to get into here, I’ve done a separate item.)

What’s happening in the international shipping industry right now is complicated and I, unlike Sheehy, do not pretend to understand it well enough to offer solutions.

But I do see that COVID is a factor, something the man “promoting” the Port of Sydney seems to have missed.