Port of Los Angeles’ Seroka says potential 2% to 5% cargo shift to West Coast

There could be between a 2% to 5% shift of cargoes from East and Gulf Coast ports to the West Coast, according to Eugene Seroka, Executive Director, Port of Los Angeles.

At his March media briefing, Seroka said that uncertainties with this year’s International Longshore Association (ILA) contract covering Atlantic and Gulf Coast ports as well as continued problems of ocean carriers accessing the Panama and Suez canals have resulted in the possible shift of cargoes to the West Coast: “So, we're starting to see companies talk about shifting two, three, five percent of their business to different gateways to diversify a little bit. … As I've said before … we're not trying to profit on anyone else's misfortune, but we do have capacity here in Los Angeles and in our effort to support those importing and exporting companies and the American economy, we stand ready to assist.”

In addition, Seroka noted that freight rates to the East Coast are on the rise: “There's also the East and West Coast rate differential right now with East Coast rates having a wider gap versus those here out West than in recent memory. A lot will be made of that as contracts are negotiated … Don't be surprised if we see peak season cargo coming here to the West Coast just a little bit earlier than usual … Here in LA we're running at about 75 to 80% of peak capacity. We're ready to pivot and handle whatever comes our way.”

Problems With UP & BNSF Reliability

With a possible surge in West Coast container volumes, one of the concerns expressed at the recently concluded Trans Pacific Maritime 2024 (TPM 2024) conference was whether Union Pacific and Burlington Northern Santa Fe rail service would run into the same problems moving containers from the Los Angeles and Long Beach ports to Midwest destinations as occurred during the import surge experienced during the Pandemic. This was a major cause of the transportation collapse that led shippers to move their business to Atlantic and Gulf Coast ports.

Journal of Commerce reporter Bill Mongelluzzo pinpointed the problem in a question to Seroka who responded as follows: “As of Friday’s operational report, we had about 12,500 rail containers here at the Port of Los Angeles. I'd like to see that number at around 9,000, given the overall volume of import and export activity that we have right now … 12,500 on the docks right now, 4,300 of which are nine days or older. That number should be closer to zero. Now, as explained to me by both Western railroads, there have been a couple of extenuating circumstances, some outages on rails, some imports that came in that need to be moved off dock to ancillary yards that'll be pushed out across the transcontinental system. Safe to say though, one of the great takeaways that we took from the surge during COVID is that we put together this dashboard of vital statistics that we look at every single day. By no means is this any kind of catastrophe at this point. It's just simply a watch out working together between the marine terminal operators, liner shipping companies, and the Western railroads. We will see this little bit of an uptick start to moderate and turn back down.”

Increase in Near Shoring to Mexico

Seroka was accompanied at the briefing by Leo Huisman, APM Terminals’ Regional Managing Director, Americas. Huisman oversees 14 container terminals in eight countries across North and South America, including APM Terminals Pacific at the Port of Los Angeles.

Huisman noted: “What I do see is that the nearshoring in the Americas is continuing and especially some spectacular growth on imports in Mexico. So that is very strong. And I think other countries in Latin America will also benefit from this. Of course. Being based in Panama, I live the drought currently in the Panama Canal, and we have to face that climates warming is having an impact. The El Ninos are getting tougher and tougher and as such, the Panama Canal is a big bottleneck, less intake on vessels and some rerouting, and it is increasing the cost as you see (and) starting to filter through on the price differential between East Coast and the West Coast. And of course … earlier this year with the Red Sea attacks, that really has shifted the whole industry in a different gear absorbing all the excess capacity and letting shifts run faster now. But the shipping lines have done quite well in making sure capacity is able to meet the demand … But I'm positive that across the whole Western Hemisphere we see in 2024 more growth than what we have seen in 23.”

LA/LB Zero Emission Progress

Huisman spoke favorably of the zero emission goals embarked upon by the Ports of Los Angeles and Long Beach through their Clean Air Action Plan: “I would like to say specific to Los Angeles and Long Beach, I think you have a regulation out there … the Clean (Air) Action Plan, which is unique in the world. I think in 2030, you can be the complex which has a zero-emission objective achieved that is something remarkable and we need to invest in the right cargo handling equipment so that we can make this transition from diesel to the more sustainable fuels in the world. And the second challenge, I would say is …you need to make sure that all the liners are deploying their newest vessels in the Los Angeles/Long Beach corridor because that is the biggest item we need to create. The green corridors that the ocean part of the transport chain (requires) … these vessels (use) the eco-friendly fuels (such as) … green methanol … And then a third item, I think is that all this new technology, which we have to accelerate … is coming to the workforce. So, we have to upskill and retrain the workforce to be able to deal with this more advanced technology that creates high skill jobs.”

Ocean Carrier Reliability

Huisman discussed the challenges of reliability and the new ocean carrier alliance between Maersk and Hapag Lloyd known as the Gemini Alliance: “I think the alliances with the Gemini birth is an important change because the vessel classes are getting larger, the networks are getting more complex, and the reliability of the liner services is not very good as we can see in the statistics. The Gemini is basically re-engineering the whole network setup so that they get to … 90% reliability. And that would be great to also achieve … in Los Angeles and Long Beach.”

However, Seroka noted: “We seem to go in cycles on this issue, Leo. It seems like there is not a lot of emphasis on that secure on-time arrival departure from the cutoff in Asia to the availability here at the destination in the United States. And then suddenly we pivot back again to something that clients have been asking for a long time. Again, it seems a little bit cyclical. Will it stick this time?”

Huisman expressed the hope that reliability would improve.

New COSCO Port in Peru

Huisman was asked about the impact of the new COSCO (China Ocean Shipping Company) port complex that will open at Chancay, Peru later this year. He said the port could result in COSCO increasing its market share of the South American Pacific Coast trades: “COSCO is building a super modern port with an automated yard (and) state of the art equipment, and they're working in terms of redefining how shipping lines will serve … the West Coast of South America. And I do believe that with its capabilities its … crane set up and its water depth that a lot of the smaller ports in Chile, Peru, and in Ecuador will be served in the future by a different concept … they will be hubbing from that particular port … for Peru, it will generate hundreds of thousands of containers in trans-shipment and a different ship system, which I think in the end is to the benefit of importers and exporters. So, it's going to … hopefully start at the end of this year… and it'll be super interesting for everybody to follow how that is transforming how container shipping is done on the West Coast of South America.”