Biden, Battling Supply Chain Woes, to Announce Port Will Operate 24/7
WASHINGTON — President Biden will announce on Wednesday that the Port of Los Angeles will begin operating around the clock as his administration …
WASHINGTON — President Biden will announce on Wednesday that the Port of Los Angeles will begin operating around the clock as his administration struggles to relieve growing backlogs in the global supply chains that deliver critical goods to the United States.
Product shortages have frustrated American consumers and businesses and contributed to rising prices that are hurting the president politically. And the problems appear poised to worsen, enduring into late next year or beyond and disrupting shipments of necessities like medications, as well as holiday purchases.
Mr. Biden is set to give a speech on Wednesday addressing the problems in ports, factories and shipping lanes that have helped produce shortages, long delivery times and rapid price increases for food, televisions, automobiles and much more. The resulting inflation has chilled consumer confidence and weighed on Mr. Biden’s approval ratings. The Labor Department is set to release a new reading of monthly inflation on Wednesday morning.
Administration officials say that they have brokered a deal to move the Port of Los Angeles toward 24/7 operations, joining Long Beach, which is already operating around the clock, and that they are encouraging states to accelerate the licensing of more truck drivers. UPS, Walmart and FedEx will also announce they are moving to work more off-peak hours.
Mr. Biden’s team, including a supply chain task force he established earlier this year, is working to make tangible progress toward unblocking the flow of goods and helping the retail industry return to a prepandemic normal. On Wednesday, the White House will host leaders from the Port of Los Angeles, the Port of Long Beach, and the International Longshore and Warehouse Union to discuss the difficulties at ports, as well as hold a round table with executives from Walmart, UPS and Home Depot.
But it is unclear how much the White House’s efforts can realistically help. The blockages stretch up and down supply chains, from foreign harbors to American rail yards and warehouses. Companies are exacerbating the situation by rushing to obtain products and bidding up their own prices. Analysts say some of these issues may last into late next year or even 2023.
Administration officials acknowledged on Tuesday in a call with reporters that the $1.9 trillion economic aid package Mr. Biden signed into law in March had contributed to supply chain issues by boosting demand for goods, but said the law was the reason the U.S. recovery has outpaced those of other nations this year.
Consumer demand for exercise bikes, laptops, toys, patio furniture and other goods is booming, fueled by big savings amassed over the course of the pandemic.
Imports for the fourth quarter are on pace to be 4.7 percent higher than in the same period last year, which was also a record-breaking holiday season, according to Panjiva, the supply chain research unit of S&P Global Market Intelligence.
Meanwhile, the pandemic has shut down factories and slowed production around the world. Port closures, shortages of shipping containers and truck drivers, and pileups in rail and ship yards have led to long transit times and unpredictable deliveries for a wide range of products — problems that have only worsened as the holiday season approaches.
Home Depot, Costco and Walmart have taken to chartering their own ships to move products across the Pacific Ocean. On Tuesday, 27 container ships were anchored in the Port of Los Angeles waiting to unload their containers, and the average anchorage time had stretched to more than 11 days.
Jennifer McKeown, the head of the Global Economics Service at Capital Economics, said that worsening supplier delivery times and conditions at ports suggested that product shortages would persist into mid- to late next year.
“Unfortunately, it does look like things are likely to get worse before they get better,” she said.
Ms. McKeown said governments around the world could help to smooth some shortages and dampen some price increases, for example by encouraging workers to move into industries with labor shortages, like trucking.
“But to some extent, they need to let markets do their work,” she said.
Phil Levy, the chief economist at the logistics firm Flexport and a former official in the George W. Bush administration, said a Transportation Department official gathering information on what the administration could do to address the supply chain shortages had contacted his company. Flexport offered the administration suggestions on changing certain regulations and procedures to ease the blockages, but warned that the problem was a series of choke points “stacked one on top of the other.”
“Are there things that can be done at the margin? Yes, and the administration has at least been asking about this,” Mr. Levy said. However, he cautioned, “from the whole big picture, the supply capacity is really hard to change in a noteworthy way.”
The shortages have come as a shock for many American shoppers, who are used to buying a wide range of global goods with a single click, and seeing that same product on their doorstep within hours or days.
The political risk for the administration is that shortfalls, mostly a nuisance so far, turn into something more existential. Diapers are already in short supply. As aluminum shortages develop, packaging pharmaceuticals could become a problem, said Robert B. Handfield, a professor of supply chain management at North Carolina State University.
And even if critical shortages can be averted, slow deliveries could make for slim pickings this Christmas and Hanukkah.
“I think Johnny is going to get a back-order slip in his stocking this year,” Dr. Handfield said.
Discontent is only fueled by the higher prices the shortages are causing. Consumer price inflation probably climbed by 5.3 percent in the year through September, data from the Bureau of Labor Statistics is expected to show on Wednesday. Before the pandemic, that inflation gauge had been oscillating around 2 percent.
Officials at the White House and the Federal Reserve, which has primary responsibility for price stability, have repeatedly said that they expect the rapid price increases to fade. They often point out that much of the surge has been spurred by a jump in car prices, caused by a lack of computer chips that delayed vehicle production.
But with supply chains in disarray, it is possible that some new one-off could materialize. Companies that had been trying to avoid passing on higher costs to customers may find that they need to as higher costs become longer lived.
Others have been raising prices already. Tesla, for instance, had been hoping to reduce the cost of its electric vehicles and has struggled to do that amid the bottlenecks.
“We are seeing significant cost pressure in our supply chain,” Elon Musk, the company’s chief executive, said during an annual shareholder meeting Oct. 7. “So we’ve had to increase vehicle prices, at least temporarily, but we do hope to actually reduce the prices over time and make them more affordable.”
For policymakers at the White House and the Fed, the concern is that today’s climbing prices could prompt consumers to expect rapid inflation to last. If people believe that their lifestyles will cost more, they may demand higher wages — and as employers lift pay, they may charge more to cover the cost.
What happens next could hinge on when — and how — supply chain disruptions are resolved. If demand slumps as households spend away government stimulus checks and other savings they stockpiled during the pandemic downturn, that could leave purveyors of couches and lawn furniture with fewer production backlogs and less pricing power down the road.
If buying stays strong, and shipping remains problematic, inflation could become more entrenched.
Some of the factors leading to supply chain disruptions are temporary, including shutdowns in Asian factories and severe weather that has led to energy shortages. Consumer habits, including spending on travel and entertainment, are expected to slowly return to normal as the pandemic subsides.
But most companies have enormous backlogs of orders to work through. And company inventories, which provide a kind of insulation from future shocks to the supply chain, are extremely low.
To get their own orders fulfilled, companies have placed bigger orders and offered to pay higher prices. The prospect of inflation has further encouraged companies to lock in large purchases of products or machinery in advance.
“The customers that are willing to pay the most are most likely to get those orders filled,” said Eric Oak, an analyst at Panjiva. “It’s a vicious cycle.”
Emily Cochrane contributed reporting.