Idle Thoughts for a Short Month
By Jock O’Connell
One February Sunday back in the late 1960s, the long-time New York Times columnist Russell Baker (who died last month) took issue with T.S. Eliot’s claim that April is the cruelest month. No, insisted Baker, that status belongs to February. As I read his essay -- while staring out from my hillside dormitory at the eternally gloomy skies looming over a cold and damp Worcester, Massachusetts -- I couldn’t help but agree. We should all be grateful that a month which begins with otherwise reasonable people in western Pennsylvania celebrating a weather-forecasting rodent, features a holiday contrived by struggling florists and greeting card companies, and ends every fourth year with the awkwardness known as Sadie Hawkins Day is so short. The only thing good about February is that spring training camps open to signal the rebirth of life.
So, in this February a half century along, what can I say? For starters, happy new year! It’s the Year of the Pig in Asia, and the Chinese are appropriately marking the occasion by assuring President Trump that they’ll be resuming purchases of American soybeans. By sheer coincidence, though, Chinese hogs are being slaughtered in record numbers because of a swine flu epidemic and that does not bode well for us since soybeans in China are largely used in animal feed.
In the short run, resumption of the soybean trade to China should be good news for West Coast ports, especially smaller niche ports like Kalama, Longview, and Vancouver (the one in Washington State). During the annual soybean shipping season, which normally runs from October until March, those ports are largely given over to the China soybean export trade. The suspension of that trade has left them scrambling for alternate cargos.
Even though Chinese Vice Premier Liu He delighted President Trump during an Oval Office meeting late last month by informing him that China would be purchasing five million tons of U.S. soybeans, celebrations may be premature. Doubts are already creeping in about the Chinese commitment to import more American soybeans. Traders at the Chicago Board of Trade, where commodity futures and options are traded, were sounding a skeptical note last week after the cancellation of Chinese soybean purchase orders. (For those keeping score at home, China has a long and storied history of reneging on promises made to trading partners. See, for example, the U.S. Trade Representative’s 183-page report issued earlier this month describing China’s alleged failures to abide by World Trade Organization rules in the years since the Asian power joined the WTO in 1991.)
The longer-term may bring a sadder story. In a forecast issued by the U.S. Department of Agriculture last week, U.S. soybean exports are not expected to match pre-tariff levels until 2016-17. It is also likely that, having been burned by the Chinese tariff (which was in retaliation for tariffs the White House imposed on Chinese goods), U.S. soybean farmers will try to diversify their overseas markets to minimize their exposure in the event of another China shock. This fall and winter, the buyers stepping in – perhaps opportunistically -- to import U.S. soybean exports were largely in parts of the world not ideally served by ports in the Pacific Northwest. To be sure, while exports have risen modestly to Japan, South Korea, and Taiwan in recent months, the largest increases have come from new buyers in Europe, the Middle East, and curiously, Argentina. From the perspective of ports in the Pacific Northwest, these are not destinations you want to see playing a more dominant role in the overseas market for U.S. soybeans.
A Few Words on the Transatlantic Trade. Out here on the West Coast, we tend to obsess about the transpacific trade and especially about the USWC ports’ steady loss of market share to other North American ports. By contrast, we hear very little about other major maritime trade routes. Like the transatlantic routes between Europe and the U.S.
For most of the nation’s history, trade between Europe and the United States was pretty much the entire story of America’s foreign commerce. As recently as 1970, just 18.4% of all U.S. containerized commercial trade (by tonnage) involved the Far East, while 62.1% was conducted with Europe and the Mediterranean. (The container trade was then not yet calibrated in TEUs.)
Things changed rapidly over the ensuing decade with the emergence of Japan, Taiwan, and Hong Kong as major U.S. trading partners. In its report for 1980, MARAD identified the Far East as “the leading area for containerized traffic.” The 1,315,000 TEUs transported in the U.S. transpacific trade that year represented a 35.7% share of the entire U.S. container trade that year, displacing the U.S. trade with Europe and the Mediterranean. And while New York remained the leading U.S. container port with 750,000 total TEUs handled in 1980, the next four ports were all out here: Los Angeles (445,000 TEUs), Oakland (342,000 TEUs), Seattle (329,000 TEUs), and Long Beach (295,000 TEUs).
Certainly by 1980, the two San Pedro Bay ports were poised to overtake New York as the nation’s largest container gateway. And they did so with great alacrity. By 1990, Los Angeles and Long Beach were handling nearly twice the volume of TEUs as the Port of New York/New Jersey, which actually was even handling fewer boxes than the Ports of Seattle and Tacoma, ports which would eventually become the Northwest Seaport Alliance. By 2000, the San Pedro Bay ports were handling over three times as many TEUs as their main East Coast rival. In 2007, the last full year before the onset of the Great Recession, the amount of containerized tonnage crossing the Pacific dwarfed the volume across the Atlantic by a factor of 3.6 to 1.
Fast forward to the present. Through the first eleven months of 2018, containerized imports from the European Union amounted to 26.23 million metric tons. By comparison, containerized imports from East Asia through most of last year totaled 88.54 million metric tons.
Although other ports have invested mightily to build their container trades, just shy of a third of containerized imports from the EU still enters through the Port of New York/New Jersey, with Norfolk, Houston, Charleston, and Savannah rounding out the top five biggest import terminals for imported goods from the 28-member EU. Together, they account for nearly 70% of all containerized tonnage arriving at mainland U.S. ports from the EU. The next largest recipient of EU containerized imports last year – in sixth place -- was the San Pedro Bay maritime gateway, which accounted for 7.0% of inbound containerized tonnage from the EU. The share of the inbound container tonnage from the EU for all of the Big Five USWC ports was 11.9%. Considering that the three coastal states alone produced 18.3% of America’s Gross Domestic Product last year and other states in the West added another 8.7%, it would seem that the five major USWC ports are punching below their combined catchment area’s weight.
It’s probably worth noting here that the LA/LB share of the inbound transatlantic container trade through November of 2018 was much smaller – in tonnage terms -- than the NY/NJ’s 12.4% share of the inbound transpacific container trade. It may also be worth pointing out that, while the San Pedro Bay ports had a 4.5% share of the declared value of containerized imports from the EU through all but the final month of 2018, the NY/NY ports held a 10.3% share of the value of U.S. containerized imports from East Asia.
Annual State of the Port events up and down the West Coast feature port officials extolling the growth seen over the preceding year with barely an acknowledgment of the fact that, while their collective share of the transpacific trade has been conspicuously lapsing, there has been no appreciable gain in the transatlantic trade. As Exhibit A suggests, the Big 5 USWC ports have not made a dent in the transatlantic import trade, while they have seen their share of the Far East import trade steadily diminish. One thing seems fairly obvious: Those hopeful arguments once voiced that the expanded Panama Canal would turn out to be a two-way street that might enable USWC ports to boost their share of containerized imports from the EU has proved a non-starter.
The Saga of the Portlands. Perhaps nothing is more emblematic of the travails of USWC ports than what’s become of the once thriving Port of Portland (the one in Oregon). Once upon a time, the Columbia River gateway merited inclusion on any list of U.S. West Coast container ports. While its box trade never came anywhere close to matching the USWC’s Big Five ports, it did process an average of 339,570 TEUs in the 1990s and 267,510 TEUs in the first decade of this century. Its peak, however, was back in that earlier era. Now it handles fewer containers than the other Port of Portland (the one in Maine).
PDX (I’ll use the airport code) saw its container trade crest in 2003, when it handled 339,571 TEUs. Things kind of went downhill after that, done in by a disastrous labor-management dispute, the advent of larger ships, and changes in the types of goods it traded. Meanwhile, PWM (stands for Portland-Westbrook-Maine) has seen a minor fillip of business from Eimskip, the Icelandic shipping line which made PWM its U.S. headquarters in 2013. By contrast, PDX has not seen scheduled container vessel service since 2015. That’s when Hanjin Shipping pulled out of PDX, taking about 80% of the container business at Terminal 6. The port’s other major container partner, Hapag-Lloyd, departed later that year. A small carrier, Westwood Shipping Lines, kept up intermittent service for a while but it too finally dropped out, leaving PDX with ample room for growth. In 2018, PDX handled all of 1,104 TEUs, while PWM moved 22,325 TEUs.
Still, while the numbers of the respective Portlands may be momentarily meager, you can at least be assured of dining exceptionally well in either town.
The commentary, views, and opinions expressed by Jock O’Connell are his own and do not reflect the views or positions of the Pacific Merchant Shipping Association. PMSA does not endorse, support, or make any representations regarding the content provided by any third party commentator.