Do Congested Ports Cause Higher Shipping Costs?

As inflation rises, many are pointing to fragile supply chains and increasing shipping costs as key drivers of the recent price increases. In addition to those of rising prices, there have been several reports of delays and congestion in certain ports, with the ports of Los Angeles and Long Beach receiving the most attention in the U.S. of late. In this blog post, we use data on the price of shipping between several different origin countries and three of the biggest U.S. ports—Houston, Los Angeles-Long BeachThough the ports of Los Angeles and Long Beach are independent, the data set combines information on the two ports. and New York-New Jersey—to examine the role of port congestion in the increase in shipping prices.

The Cost of Shipping to Key U.S. Ports

The data for this article come from Drewry Shipping Consultants, which collects data on the price of shipping between ports over time. Here we focused on countries that ship goods to the Port of Houston, the ports of Los Angeles-Long Beach, and the Port of New York and New Jersey. For each foreign port, we plotted the change in the cost of shipping a 20-foot container between January 2019 and January 2022. The figure below shows the results for 10 select foreign ports that have data for those months and ship to these U.S. ports.

Change in Shipping Costs from Select International Ports, January 2019 to January 2022

SOURCES: Drewry Shipping Consultants and authors’ calculations.

As you can see in figure, costs have increased for almost all pairs of origin and destination ports in the data set.While we look at the growth in the absolute level of shipping costs, the figure looks similar when comparing growth rates in shipping costs as well. Durban in South Africa is the only port with decreasing shipping costs in this time period, and the decrease is largest for Durban to Houston. Otherwise, all other ports saw increased shipping costs, with the largest increases for goods shipped from Shanghai and from Ho Chi Minh City, Vietnam, and the smallest increases for shipments from Melbourne, Australia.

Pattern of Rising Costs Varies More by Country of Origin Than by Port of Entry

There does not seem to be a consistent pattern for cost increases by destination port. The cost increase of shipping to Los Angeles-Long Beach is not systematically higher than the cost increase of shipping to New York or Houston. If the increased price of shipping were primarily a result of congestion at a specific port like Long Beach, the cost of shipping would rise similarly for all goods coming into that congested port regardless of the port of origin. However, shipping price increases seem to vary much more by origin country than by port of entry, suggesting that the prices are not driven solely by congestion at specific U.S. ports.

However, it is important to note that different ports might specialize in different goods. For example, Houston is a large importer of gas and other liquid bulk commodities like palm oil, while Los Angeles imports furniture, auto parts, apparel and plastics. The impact of the pandemic and supply chain issues differs depending on the industry in question, which could cause some of these patterns across ports and countries.

The last factor to consider is substitution across ports: When Los Angeles-Long Beach is congested, we would expect Chinese exporters in Shanghai to adjust and try sending goods to Houston or New York. If this were the case, we should see the biggest price increases for these West Coast ports in Shanghai and across all countries—but this is not the case. The increased cost of shipping to Houston or New York from Shanghai was higher, and only in the port of Genoa, Italy, did rising shipping costs to the West Coast ports exceed those to the other two U.S. ports.

Rising shipping costs have played a role in the rising costs across the U.S. economy, as we’ve pointed out in a recent Economic Synopses essay. However, the rising cost of shipping goods is not connected to one specific port; rather, different countries see different patterns of shipping cost increases despite the port of entry.

Notes and References

¹ Though the ports of Los Angeles and Long Beach are independent, the data set combines information on the two ports.

² While we look at the growth in the absolute level of shipping costs, the figure looks similar when comparing growth rates in shipping costs as well.