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Supply chain backlogs: ‘You have seen the worst of it,’ Port of Long Beach executive director says

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Port of Long Beach Executive Director Mario Cordero joins Yahoo Finance Live to discuss the outlook for supply chains, the high demand for goods during the holiday season, and how the pandemic affected cargo ships.

Video transcript

SEANA SMITH: Well, the holiday shopping season is in full swing and our West Coast ports the ports of Long Beach and LA reporting some supply chain progress. Aging cargo on docks have dropped by about a third. So let's talk about what's happening right now. We want to bring in Mario Cordero. He's the Port of Long Beach's executive director.

Mario, it's great to have you back here on Yahoo Finance. It sounds like the situation is improving as we get into the heart of the holiday shopping season. Do you think we've seen the worst of it?

MARIO CORDERO: Well, thank you Seana, for the invitation. I think from the global supply perspective, you have seen the worst of it. Obviously, here in the Long Beach, Los Angeles complex, the nation's largest container complex, we are making progress and I'm optimistic that again, as we go into next year, perhaps into the next six months, we'll have some sense of normalcy returning.

- And sir, I wanted to ask you. The goods that are on the water right now, obviously they're not going to make it in time for Thanksgiving, Cyber Monday. But do they get onto store shelves before the holidays or are they all just sort of now going to come in after the new year?

MARIO CORDERO: Well, some will. I mean, there will be a good percentage that will get on the shelves. Keep in mind that a lot of the goods that are on anchor in these vessels, are actually inventories that the shippers have prepared for the coming year. So again, it's a combination of both the goods that the consumer expects before the holidays or at the holidays, and of course, goods as we prepare for the spring of 2022.

ADAM SHAPIRO: Is it sustainable though, the catch up when there's a labor shortage? We keep hearing about the shortage of truck drivers. I mean, we need people to actually physically move stuff.

MARIO CORDERO: Adam, that's a good question. I think from the port perspective, the men and women who were on the docks, who work on the docks, there is no labor shortage there. The truckers who do the short haul haulage here in the port complex, there's trials and tribulations, but again, the shortage is a national perspective of the trucking industry as a whole. But thankfully, here again, it's just a matter of, again, working through the bottlenecks and congestion, that again, as you've referenced, we make good progress.

SEANA SMITH: Mario, talking about that progress, obviously, we still have some ways to go. I guess when is your best guess, and I it's very hard to pinpoint an exact date or time frame, but when do you think things are going to be totally back to normal?

MARIO CORDERO: Well, that answer really is contingent on the virus. I mean, keep in mind all that we're seeing or witnessing here in the last year is COVID based that commenced a disruption in the supply chain. Earlier this summer we thought there was light at the end of the tunnel and then came the Delta variant. So assuming that we continue in a trajectory of a positive control of the virus, vaccinations, et cetera, then again I think we're looking to maybe another six months. Now, there are opinions who believe that we're going to go through this for another year. But I think all of that really takes into consideration the impact of the virus as we go forward.

- The ramp up has been so exponential, going from 40 hours a week to 24/7 operations. But how sustainable is that to work at full capacity, given the sort of barriers and restrictions that are in place right now? And then how important is then the President's stimulus, $17 billion, going towards ports and infrastructure?

MARIO CORDERO: Oh, number one, the investment to the ports that we've seen here from the Investment and Jobs Act is very important. First time that in fact, ports have been earmarked to receive funding. So that's very critical and it's welcome news from the administration. Now, in terms of the scenario of what we have here with the cargo moving and the hours at play, the good news is, to use a cliche, crisis brings opportunity. Despite the crisis that we've witnessed, there have been opportunities now to really look to transformational change in the supply chain. So this has been a discussion for quite a number of years.

Here at Long Beach and Los Angeles, that is the two ports, we expect to move in excess of $20 million TEU containers for calendar year 2021. Now, that is not surprising to anyone in this industry. We knew a years, several years back that we were going to have this type of volume. So I think this crisis has brought us to an opportunity now to not only just discuss and debate how we transform the supply chain, but how we move forward.

And you've mentioned one way one way is the 24/7 framework, extended gate hours that we've been talking about for years. So needless to say, I think there's good news with regard to the robust discussion that's been had with regard to what this supply chain requires. Because I'll end by saying, we all know how fragile the supply chain was. And this hiccup that happened, a very serious one, obviously exposed that.

ADAM SHAPIRO: In your role as executive director, do you communicate with port directors in foreign countries when we talk about the supply chain and are they seeing relief at their end? Because it would seem to me as we start sending empty containers back, they need to have the manpower to use those containers to keep this loop, I guess, moving appropriately.

MARIO CORDERO: Well, Adam, number one, I do have those conversations. And number two, keep in mind that when we talk about vessels that have been at anchor waiting to get into a port, overall, when you look at the ports of Europe, Asia, and the USA, you're talking about an excess of 500 vessels that are waiting to get into these global ports. So obviously, the challenge here has been global in nature. There is obstinate optimistic thinking that thinks there's light at the end of the tunnel.

Although I will say that when it comes to Asia, they have very strict protocols there. If they find that in the labor force there's a COVID-19 positive, they shut down the terminal. Or in the case of a manufacturing venue, they shut down manufacturing. So we're going to go through the trials and tribulations of again, the unforeseen movement of cargo from Asia. But the good news is I think, again, there's progress here.

SEANA SMITH: Mario, I know you've delayed fines for some of the lingering cargo containers. Is this something you're still considering over the next couple of weeks and when are you going to reassess these potential fines?

MARIO CORDERO: Well, we're scheduled to reassess this in November. Next Monday, November 29. So I think, again, the good news is we did not move forward to implement that fee because we've been seeing progress. I mean, it's very fair to represent that the White House envoy John Porcari has done a great job in getting all the stakeholders together to roll up our sleeves, don't point fingers, and let's get the job done.

So you commence a program by indicating there's a 30% reduction here in terms of the long-term containers that have been dwelled here for quite some time. Over the nine days, which is far beyond normal.

SEANA SMITH: Step in the right direction. Mario Cordero, port of Long Beach's executive director. Thanks so much for taking the time to join us.

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