The supply-chain constraints, spiking rates, and container dislocations associated with the COVID-19 pandemic saw some cargoes switching to breakbulk from containers in recent years. That trend has continued into 2022, as seen by the growth in breakbulk business at ports around the country.
From the Pacific Northwest to the Gulf of Mexico and up and down the East Coast, some ports have seen double-digit, and, in the case of some cargoes, triple-digit, breakbulk growth spikes in recent months. The question, as is often the case with shifts in cargo patterns, is whether that growth is sustainable. Decreases in container volumes and rates suggest that an easing of container conditions is on the horizon, but the supply-chain crisis will likely not be resolved in the short run.
Commodities Boost Breakbulk
Breakbulk growth in commodities such as iron, steel, rubber, and forest products has been seen in Georgia ports, which reported a 28% increase in May. Seattle and Tacoma, of the Northwest Seaport Alliance, have shattered breakbulk records in recent months, as container volumes decreased. Volumes have grown 34.3% this year through August, and July was a record-breaking month for breakbulk cargo handled at NWSA-operated breakbulk terminals.
Imported steel is leading a breakbulk surge at the Port of New Orleans, where volumes more than doubled during the fiscal year 2022, growing by 123%. Rubber, plywood, and breakbulk coffee volumes have also seen increases. The port said CEO Brandy Christian, “is being sought as an alternative for shippers seeking to mitigate their exposure to container shipping challenges.”
The same phenomenon was noticed by Jeff Theobald, the executive director of the Port of Philadelphia, who said that some shippers “shifted to breakbulk” last year. Breakbulk steel volumes at the port were up 196% in 2021, and cocoa went up 106%.
At the Port of Jacksonville, which has emphasized its container and auto businesses in recent decades, the breakbulk volume also saw increases during COVID-19. The paper company UPM has been moving large volumes of glossy paper through a large on-dock breakbulk warehouse in Jacksonville for decades.
“With that anchor of a tenant, it was hard to walk away from breakbulk,” said Alberto Cabrera, the port’s sales director. “The port has a strategy of keeping diverse cargoes flowing through the port,” and JAXPORT’s breakbulk volumes of frozen poultry, wood pulp, and lumber have shown increases.
The Port of Vancouver, Washington, picked up two new breakbulk customers, shipping aluminum and bagged sulfites, in the last year, each bringing an additional vessel per month to the port. “That’s a fantastic shot in the arm for us,” said Alex Strogen, the port’s chief commercial officer, “and provides predictability and stability in our work.” Both the new customers signed three-year contracts with the port, symbolic, according to Strogen, that they have “lost faith in the container side of the equation.”
Port Tampa Bay’s strong growth in its breakbulk business is attributable, according to port spokesperson Lisa Wolf-Chason, “to Florida’s rapid expansion, especially in the Tampa Bay/Orlando I-4 Corridor region, the fastest growing part of the state and one of the hottest industrial markets in the country.” Lumber is a rapidly expanding breakbulk commodity in Tampa Bay, growing by over 160% in 2022. Other breakbulk increases have been seen in bagged cement and perishables.
Breakbulk Facilities Expanding
Breakbulk facilities are expanding, some with the $17 billion in United States government funding approved last year toward improving port infrastructure. The Port Infrastructure Development Program “will play an important role in modernizing port infrastructure and increasing capacity at breakbulk ports,” said Sadé Chick, director of corporate affairs at the Port of Beaumont, Texas. The PIDP, Chick predicted, will streamline the granting process, and will “result in the more efficient movement of breakbulk and other cargoes.”
The Port of Galveston, which handles wind components and has seen an increase in breakbulk refrigerated cargoes, is “moving forward with two projects totaling $50 million to expand acreage and infrastructure,” reported port CEO Rodger Rees. Those developments will involve filling two outdated slips to gain 18.6 acres and increase dock space by 2,200 linear feet and extend rail to the waterfront for direct ship-to-rail cargo transfers.
In September, the Tioga Marine Terminal, a multi-purpose facility that handles much of the breakbulk cargo at the Port of Philadelphia, won a $20.3 million federal grant for a new 100,000 square-foot warehouse, with construction to begin in 2024. The funding, from the U.S. Department of Transportation Infrastructure for Rebuilding America (INFRA) program, “will help the port meet a growing demand and attract more business,” said Theobold. Tioga in recent months has seen increases in pulp, project cargo, steel, and lumber products.
How Long Will the Breakbulk Boom Last
To the extent that growth in breakbulk has been driven by a flight from container shipping, the question becomes how long that phenomenon can last. As the post-pandemic economy normalizes, U.S. consumer spending has shifted back to services from goods. Container imports from China fell in October, according to the latest Descartes figures, by 5.5% from September and 22.8% from 2022’s high in August. That trend could become more pronounced if the U.S. economy heads into recession.
A recent McKinsey report studied several container-shipping scenarios, the best of which would not see pre-pandemic conditions returning before the third quarter of 2023. Other scenarios posit the normalization of capacity by late 2023 or early 2024, but with freight rates still elevated well above 2019 levels. In the worst-case scenario, “full capacity recovery does not return, and rates remain elevated through 2024.” Efforts to improve terminal fluidity prove unsuccessful and “chronic congestion becomes the norm.”
Some hope for the container sector comes from a recent Drewry report, which saw improved conditions for container terminals in North America beginning in the second half of 2022. That observation was echoed in the Descartes November report which noted a “more widespread” reduction in port delays. But the data also “reaffirms,” the report said, “that it will be some time before the pressure on supply chains and logistics operations begins to lift.” In other words, it’s likely that container shipping will recover later rather than sooner, and that will benefit breakbulk in the interim.