West Coast Ports Provide National Supply Chain Resilience, Unless We Allow Cargo Caps to Limit System Capacity

By Mike Jacob, President, Pacific Merchant Shipping Association

The nation’s largest port complex – the Ports of Los Angeles and Long Beach – just handled their highest import volumes of any month since the peak of the pandemic.  And, yet despite container totals that looked like some of the all-time monthly highs of 2021, our marine terminal operations in Southern California are working without lines of ships offshore, chassis shortages, spikes in detention and demurrage, or massive jumps in container dwell times at the terminals. 

The difference is resilience.  And our system’s resiliency exists in capacity and flexibility.

The global volatility that has driven this latest surge in containers on the West Coast has its roots in many causes, including the long shadows cast by the rebuilding of long vessel strings avoiding the Red Sea, and shippers mitigating the impact of potential labor issues with rail intermodal in Canada and the ILA-USMX in the Atlantic and Gulf by creating an early peak season.  These global risks have made the two San Pedro Bay Ports and the two Northwest Seaport Alliance Ports attractive gateways for discretionary cargoes.  As a result, the Ports of Los Angeles and Long Beach saw an incredible 47.4% year-over-year jump in July imports in 2024 to 936,362 TEUs compared to 635,294 in 2023.  In the Pacific Northwest, the Ports of Seattle and Tacoma saw a 24.4% jump in year-over-year imports in July 2024 compared to July 2023. 

What can we take away from the fact that, despite seeing similar total volumes to 2021 in these dramatic swings from year to year, that in 2024 our marine terminals are handling these volumes without much drama, routinely making these transactions look like any other day at the office?  

It’s resilience. System resiliency is a measure of how flexible the intermodal supply chain is to these types of shocks – how effectively, how quickly, and how seamlessly disruptions can be absorbed, and cargo re-routed. 

In 2024, the flexibility of our West Coast Ports to absorb relatively large swings in volumes is a demonstration of total system resiliency.  In 2021, the capacity for the system to provide flexibility was practically non-existent.

To optimize our trade economy, where goods flow to end points through the intermodal supply chain, shippers find the “best” pathway that meets their needs in terms of rates, reliability, travel time, and other factors, and typically multiple gateways are available that demonstrate these potential pathways.  But add in geo-political uncertainties, like wars, pandemics, or labor issues, and certain gateways might get turned “on” or “off” for shippers in the short-term.     

In 2021, we didn’t have adequate intermodal relief valves for disruptions.

In 2024, the West Coast marine terminals ARE both the nation’s primary trade gateway and our national relief valve.  

For the national intermodal supply chain to maintain this flexibility, and thus the resiliency to address uncertainty, we need to ensure that US West Coast gateways remain robust and viable alternatives.  It does not take much of an imagination to see beyond the Baltimore bridge incident that even one accident can require temporary alterations of freight patterns.   

The fact is that West Coast Ports’ capacity is what provides gateway flexibility for the intermodal supply chain.  This underscores the importance of avoiding any artificial constraints that could hinder trade flexibility and efficiency.  The biggest threat to our system’s current resiliency in this respect, would be the imposition of cargo caps by air quality regulators on this infrastructure; for example, an Indirect Source Rule imposed on the Ports of Los Angeles and Long Beach, which would take existing physical capacity and render it illegal to utilize at certain emissions thresholds.  

In 2021, resiliency suffered for lack of options when resources became constrained during the pandemic; in the crisis, carriers and cargo owners were left without the ability to find a secondary available terminal, vessel, chassis, motor carrier, distribution center or warehouse.  In 2024, the Ports of Los Angeles and Long Beach are providing resiliency to the entire system by providing carriers and cargo owners with all of these options in the face of global geopolitical unrest.  But imagine if we had artificially constrained our options here in California with local cargo caps in 2023, as previously proposed (but not adopted) by our air district – we would now be fighting a losing battle for supply chain resilience in 2024, with one hand tied behind our back, legally prohibited from providing a surge of new terminal capacity for cargo.  This would not have just damaged the Southern California economy, but sabotaged the resiliency of our national intermodal system in the process.

It is imperative for the health of our supply chain and the economy that relies on it, that we maintain our resilience, and the flexibility upon which it relies.  One key lesson from the pandemic is that our national economy suffers when we underinvest in capacity beyond the daily demands of our supply chain infrastructure.  Let’s not forget that lesson so soon after the steep price we just paid to learn it.