U.S. West Coast Ports Struggling to Stay in the Game?
By Jock O’Connell
From time to time – actually, with annoying regularity – the mullahs of the maritime media seem to take delight in citing evidence of the steadily shrinking role of America’s West Coast ports in the nation’s trade in containerized goods.
As an editor at the Journal of Commerce wrote just last week: “Since 2010, the West Coast’s market share of loaded cargo has dropped from 50.45 percent, to 44.9 percent in 2017, according to PIERS. The coast’s share of Asian imports fell from 73.3 percent to 66.4 percent over the same period, the figures show.”
Meanwhile, as the article also observed, the East Coast share of Asian imports rose from 25.1% to 30.9%, while Gulf Coast ports saw their collective share of Asian imports edge up from 1.2% to 2.4%.
I can’t much quibble with the numbers.
After posting fairly respectable growth numbers in 2017, the TEU counts at U.S. West Coast (USWC) ports through May of this year hardly suggest they are making any headway in reversing the market share slide.
Total container volume at the San Pedro Bay Ports of Los Angeles and Long Beach is up a modest but still respectable 3.7%. But Oakland managed only a 1.8% gain over the same period last year, while the two Northwest Seaport Alliance ports (Tacoma and Seattle) saw their combined container volumes through May drop by 4.9%. Altogether, the five big USWC ports handled just 2.1% more TEUs in this year’s first five months than in the same period last year. That makes last year’s coastwide gains – an impressive 6.3% year-over-year increase in total TEUs handled – look more like an anomaly.
As loyal readers know, this newsletter has been tracking container trade through major seaports on all three coasts since its first issue in September 2016. We have also been reporting statistics on the declared weight and value of containerized imports and exports that the Foreign Trade Division of the U.S. Census Bureau publishes monthly.
By all measures – TEUs, alleged dollar value, and cargo tonnage – the major U.S. West Coast ports have seen their collective shares of the nation’s containerized trade ebb in recent years. And the diminishing market shares have been most evident with respect to the transpacific trade on which those ports long feasted. (See Exhibits 1 and 2 on the next page.)
For USWC ports, the importance of the transpacific trade cannot be overstated. Last year, the five ports handled 110,501 million metric tons of international containerized cargo, 84.5% of which involved a string of Asian economies stretching from Japan to Singapore. By sharp contrast, just under 4.4% of USWC containerized shipments involved the European Union, the world’s second largest economy with a GDP larger than those of China and Japan combined. Trade with Central and South America, South Asia, and Africa accounted for even tinier shares.
Remarkably, though, U.S. Census Bureau statistics indicate that the declared weight of containerized imports from East Asia arriving at USWC ports actually declined from pre-recession levels by 1.0%, slipping from 54,726,008 metric tons in 2007 to 54,193,984 metric tons last year. Over the same period, East Asian shipments of containerized goods to East Coast ports jumped by 66.5%, from 19,188,848 metric tons to 31,941,603 metric tons. East Asian shipments to Gulf Coast ports were meanwhile up 38.4%, from 4,095,983 metric tons to 5,667,247 metric tons.
The drop in East Asian containerized import tonnage at USWC ports was due to a 11.7% fall-off in trade through the NWSA ports of Seattle and Tacoma. Oakland fared fairly well with a 9.2% increase, while the San Pedro Bay ports only saw a 3.8% increase in East Asian import tonnage between 2007 and 2017.
And yet, the container forecast guiding current planning at the Ports of Los Angeles and Long Beach anticipates throughput to grow by approximately 4.0% annually through to 2030, when total volume is expected to be 41.1 million TEUs. By way of reference, the two ports handled 16.9 million TEUs last year, an increase of 8.3% over the year before. Through the first five months of this year, though, container traffic is up 3.7%.
Of course, the San Pedro Bay ports have seen previous forecasts go wickedly awry. The one published in December 2007 expected that the two ports would be handling 27.6 million TEUs by 2015. But then the Great Recession hit, and an update issued eighteen months later reduced that expectation sharply to 17.0 million TEUs. Still, even that proved well above the 15.4 million TEUs that actually passed through San Pedro Bay in 2015.
What’s troubling is what seems to be the prevailing assumption at the San Pedro Bay ports about cargo diversions. In a November 2017 Clean Air Action Plan report, port officials comforted themselves by noting: “East and Gulf Coast ports have also seen some small benefit from the widened Panama Canal lowering transportation costs on all-water service when compared with shipping to the West Coast; however, diversion has been limited because low-value and time-insensitive goods that would most benefit from a reduction in transportation costs are already using all-water routings to East and Gulf Coast gateways. It is not clear if further cost reduction from Panama Canal expansion is significant enough to attract high-value or time-sensitive cargo that prefers speed to market.”
Port officials may want to revisit that supposition, which appears based on data from 2015, and which seriously underestimates the alacrity with which shipping lines proceeded to deploy more capacious neopanamax vessels on all-water routes to East and Gulf Coast ports via the larger set of locks at Panama that opened in late June 2016. Canal Authority statistics show that 769 neopanamax container ships have transited the isthmus so far in the current fiscal year (October 2017 through May 2018). Just two years ago, of course, that number was zero.
As for the assumption that high-value imports would continue to transit the two big Southern California ports, U.S. Census Bureau data indicate that the average dollar value per kilo of containerized East Asian imports through the San Pedro Bay ports was actually higher in the years 2011-2014 than it was last year. And while the SPB ports saw the inflation-adjusted dollar value of containerized imports from East Asia increase by 3.9% between 2007 and 2017, Savannah enjoyed a 15.4% jump. Evidently it’s just not lawn chairs and athletic socks that are making their way east through that bigger ditch in Panama.
Perhaps yet another cargo forecast update is warranted.
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.