Ports & Terminals

An Interview with John McCown

John McCown, author of the widely cited McCown Report, is an industry veteran who sees a fundamental shift away from West Coast ports to East Coast and Gulf coast ports where projections indicate that 75% of U.S. trade should be shipped compared to 25% for the West Coast. McCown is the former chairman and CEO of Trailer Bridge, the founder of Blue Alpha Capital where he is working on financing an offshore wind turbine installation vessel. McCown is also Non-Resident Senior Fellow at the Center for Maritime Strategy with the Navy League of the United States where his focus is on the intersection of merchant shipping and maritime commerce with national security.

As McCown explains, up until recently about 40% of U.S. imports were shipped through the San Pedro ports of Los Angeles and Long Beach, which ranked as the number one and number two ports in the United States by container volumes. But in 2022, the Port of New York and New Jersey surpassed the Port of Long Beach to become the nation’s second busiest port, an exclamation point to the shift in container traffic.

John McCown

In an interview with AJOT, McCown said: “If you just had an algorithm where you factored in cost per ocean mile, cost per rail mile, cost per trucking mile; what that algorithm would tell you is that something on the order of 75% of the cargo coming into the US should go over a Gulf Coast and East Coast ports, and only 25% should go over the West Coast.”

The reason is partly due to problems with pandemic related congestion encountered by Los Angeles and Long Beach in 2021-2022 and in part due to disruptions in trade caused by labor disputes between the International Longshore and Warehouse Union (ILWU), which has caused importers to spread their risk with routing more shipments through alternative gateways. McCown also notes that the widening of the Panama Canal provided bigger ship access to Asia to Gulf and Atlantic Coast ports. Finally, McCown noted, “more U.S. trade is centered on Southeast Asia and countries like India which are closer to the Atlantic Coast via the Suez Canal.”

McCown noted in two recent reports that:

  • The coastal split had “West Coast ports at 65.2% on U.S. trade in 2000, 56.8% in 2016 and 47.7% in 2022 for differences of 8.4% or 53 basis points per year from 2000 to 2016 and 9.1% or 152 basis points per year from 2016 to 2022.
  • There has been “a generally consistent eastward shift in the entry point of containers into the US. In the six years with the expanded Panama Canal, the total shift based on annual figures was 9.1 percentage points, or an average of 152 basis points per year. The total shift in the 16 years from 2000 to 2016 was 8.4 percentage points for an average of 53 basis points per year. These shifts have occurred primarily with containers whose goods are eventually destined for points whose distance from East/Gulf Coast ports is closer than West Coast ports. The eventual destination of container goods is broadly correlated with US population and three-quarters are closer to East/Gulf ports with only one-quarter closer to West Coast ports. The underlying cost economics of water versus land modes and population dynamics favor a continuation of a subtle but inevitable further transition of containers eastward. Intermodal routings to eastern points via doublestack still represent a meaningful part of total volume at West Coast ports.”
  • While “intermodal routings result in faster overall transit time compared to all or more water alternatives, that speed has cost, emissions and congestion.”

McCown says, “And then more recently is the concerns about the union [ILWU] talks …it's nearly impossible to tease out how much is the union, although I think more recently the numbers show some, you know, a pretty big part of it.”

McCown said that when there is a West coast labor agreement, some business will return to West coast ports: “That being said, I'd be pretty certainly reluctant to say that all of that's going to bounce back … I don't really know how much is going to come back. I think some will.”

Reduced Emissions Ports Don’t Attract Shippers

The West coast ports, especially LA and Long Beach, have made a major push towards zero emissions and reducing emissions on trucks equipment. McCown does not think this is a selling point for shippers, “If you're talking about shippers many of them embrace kind of reduction of emissions, but at the same time, they tend to look at the regulatory authorities to determine what that should be. And so, I think at least historically you haven't seen a lot of additional points scored. This may change, when a carbon tax comes into being, where all of a sudden the emissions that the different modes have, you know, bring with it an economic cost.”

U.S. ports need to prepare for U.S. container volumes increasing and with that trade. Ports will need to increase capacity and possibly build new ports: “If you go back to 1990 it's like four times as many containers coming into the US as we had then – and that's occurred when there's really [been] only two arguable additional container terminals; one in Charleston and one in Long Beach… So, in fact, we're moving four times as many containers with the same infrastructure. And, and we've done that through a lot of efficiency gains and productivity gains, and using unused capacity we had at the time, and most particularly, we've done it by continuing to stack containers higher. I think we're, reaching the limits.”

Port of Oakland Howard Terminal Ballpark and Condominiums Are a Mistake

In this regard, McCown is critical of the Port of Oakland’s decision to cede 50 acres for a proposed ballpark and condominiums: “I railed against … the Port of Oakland… choosing to turn over 50 acres of land that could be turned into a reasonable container terminal into make a darn baseball stadium …I think we need to have additional ports certainly additional terminals, maybe even entirely new ports.”

The Howard Terminal ballpark and condo proposal at the Port of Oakland reflects a ‘landlord port’ mentality that does not maximize the potential of maritime uses and port development and cedes business to operating ports: “I happen to think the ‘landlord model’ of ports is inferior to the ‘operating model’. The West coast ports are all kind of landlord models … It made sense back in the day, and we go back, I don't know, 50, 60, 70 years ago when there wasn't a lot of competition between ports. Today … that doesn't make a lot of sense at all. I mean, the landlord model, I'm sure they all have very talented, very bright people, but they're really not in the business …They're … in the business … of leasing land …. But what I see happening when you have an operating model, by definition, you have a stronger management structure. You have people with more credible experience in the container sector. I used the point that things that might kind of drop between the cracks of a landlord model…I wrote an article that was pretty blistering of the silliness of what Oakland was doing. And here I'm an Oakland A's fan!”

McCown says examples of operating ports are “the Port of Norfolk, Port of Savannah, the Port of Charleston and the Port of Houston are all operating ports. Houston's a bit of a hybrid, but Houston is an operating port as it relates to containers … [while] the Port of New York is a traditional landlord port.”

Merchant Marine & National Security

McCown argues that the United States needs to start growing the U.S. Merchant Marine. The need is “massive and not only with, clearly with tankers and … with recent events including Russia's invasion. And while that's a different sort of war, it underscores that big wars involving lots of conventional forces can still happen. And Russia's [failure] points out the importance of logistics … And I think everybody is realizing that sealift and logistics is (essential). Impressive and strong as our military, we have an Achilles heel (with ships and sealift). With all the saber rattling going on with China and Taiwan … if there was any involvement there, that's a very long distance requiring quite a lot of ships. So yes, that … highlight the … clear need for us to have more U.S. flag vessels.”

McCown says there is also a need to train more mariners and more support needs to go into U.S. maritime schools to build up the U.S. military sealift capability, because U.S. ships and U.S. mariners” are really the only ones you can … count on … in a time of emergency.”

He adds, “one study said we're at least 2000 trained mariners short of what we need to meet the …. demand … of the initial surge … I think there's a growing awareness that sealift is still important.”

Finally, the United States needs to ramp up its shipbuilding to support military sealift: “We do also need ship building. It is connected. We have an issue here to get shipyards ramped up for modern production. That's going to take some time.”

Stas Margaronis
Stas Margaronis


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