May 5th 2015
Congestion on the West Coast has triggered huge eastward shifts in ocean traffic, and long-term factors will sustain the shift.
For brief periods during the past week, no ships arriving at the adjoining ports of Los Angeles and Long Beach had to sit at anchor and wait to be unloaded. It’s a sign that the epic congestion that turned America’s largest port into a three-thousand-acre logjam for nearly eight months is finally ending.
But the congestion has had a huge impact on international shipping by pushing ocean shipping traffic to ports along the East and Gulf Coasts. Regional economies and employment are directly impacted by port volumes, and port authorities are constantly competing for business from cargo owners, so increased shipping traffic benefits not just eastern ports, but also the region.
For March, the Georgia Port Authority reported a 28% year-over-year increase in container volumes, volumes bumped up 13.7% at the Port of Charleston, and the Port of New York and New Jersey saw a 14.6% year-over-year increase, hitting record volumes. By contrast, in February, the Port of Los Angeles recorded a 10.2 percent decline in volume year-over-year, while volume at the Port of Long Beach declined 20.1 percent.
“Some of that is associated with issues on the West Coast,” says Georgia Port Authority CEO Curtis Foltz, and some traffic is likely to swing back to the Los Angeles and Long Beach ports, as well as other West Coast ports, as congestion there eases.
But not all of the shift is temporary. Many problems with West Coast ports are chronic; with a labor pool poised to strike and bottlenecked connections to roads and rail.
Both population density and huge volumes of agricultural exports make eastern and southeastern ports geographically sensible, but much traffic that would naturally flow there now passes through the West Coast instead because large ships to and from Asia can’t traverse the Panama Canal. The expansion of the canal, scheduled for 2016 completion, will change that math, allowing bigger ships to push directly to East Coast ports. Since ocean shipping is by far the most resource- and cost-effective way to move freight, and larger ships capture maximum economies of scale, flows are likely to shift dramatically.
Savings from larger ships are already reshaping trade flows in their own right. Even without an expanded Panama Canal, the Port of Savannah now welcomes 11 ships a week that travel from Singapore westward through the Suez Canal – a much longer haul than to Los Angeles, but competitive thanks to bigger ships.
Ports along the Gulf and East Coasts are engaged in a flurry of construction activity to accommodate current and future increases in ship sizes and overall volume. At the Port of New York and New Jersey, that means raising the Bayonne Bridge from 151 feet to 215 feet, a project that will be completed in mid-2016. And the Port of Charleston is embarking on a half-billion dollar harbor deepening project. Curtis Foltz reports that Georgia ports are aggressively purchasing cranes to expand capacity.
None of this adds up to obsolescence for West Coast ports. “Just because of where LA-Long Beach is geographically located,” says Foltz, “They will in perpetuity be the two largest and busiest ports in the United States.”
But they may not remain the shipping powerhouse they are today. The Department of Transportation projects that global trade will make up 60 percent of the U.S. economy by 2030, and world population is expected to go from 7 billion to 9 billion by 2050. That adds up to continuing increases in overall shipping volumes. While West Coast ports are struggling to handle the challenges of today, their East Coast rivals are getting ready for a very busy tomorrow.