The San Pedro ports of Long Beach and Los Angeles both set TEU records reinforcing their position as the principal gateway to the U.S. But challenges both ashore and abroad could slow growth in the near future.
The San Pedro ports of Long Beach and Los Angeles both had remarkable years in 2018 – setting records for TEUs with a flood of inbound freight from China, despite or because of the ongoing trade dispute between Washington and Beijing. But America’s largest gateway is facing challenges and this year growth is expected to moderate. And it is already showing in the first quarter statistics.
The Pacific Merchant Shipping Association (PMSA) “West Coast Trade Report, March 2019” found that US West Coast ports, primarily the Ports of Los Angeles and Long Beach, experienced a slowdown in imports during January 2019: “The slowdown was most evident at the Ports of Los Angeles and Long Beach, where January saw combined inbound loads nudge upward by just 0.8% (+6,273 TEUs) from a year earlier. However, a comparison of January’s figures with December’s at the two Southern California ports shows a combined 10.5% (-88,243 TEUs) fall-off.”
Nevertheless, the San Pedro ports are addressing many of the key issues that will improve their competitive posture in preparation for the next growth spurt.
Port of Long Beach
At the Port of Long Beach’s March 28 annual Pulse of the Port meeting the consensus view was a slowing domestic economy will likely lead to a moderate increase in container imports through 2019. This follows on an extremely successful 2018 marked by record-high cargo growth despite the ongoing trade dispute with China.
The numbers for the first quarter bear out the resiliency of the Port of Long Beach’s draw even with the China trade issues. The Port notched the second-busiest first quarter in its history, moving more than 1.8 million TEUs January through March.
That figure trails only the first quarter of 2018, a year when the Port set an annual record for container movement at 8.1 million TEUs. First quarter 2019 cargo movement eased 4.7% compared to last year’s opening quarter.
“With warehouses full from shippers rushing to beat the looming threat of escalating tariffs, shipments slowed somewhat,” said Port of Long Beach Executive Director Mario Cordero. “It’s going to take some time for inventory to cycle to markets and for typical growth to resume.”
And the port could see a boost in 2020 from an unexpected quarter.
Melissa Peralta, senior economist and forecaster for TTX, a railcar pooling company based in Chicago noted that Long Beach and other West Coast ports might benefit from the International Maritime Organization’s (IMO) requirement that container ships reduce the sulfur content of vessel fuel from 3.5% to 0.5 percent starting on Jan. 1, 2020.
Although Asian imports have steadily climbed over the past decade at East Coast ports, Peralta said that increased costs associated with the new fuel regulations could drive shippers back to shorter routes leading to West Coast ports.
The Port of Long Beach’s executive director, Mario Cordero, said in an interview with AJOT at the Trans Pacific Maritime (TPM) conference in Long Beach, that challenges from the Panama Canal expansion and continued gains by the Prince Rupert container-rail port in Canada did not prevent the Port of Long Beach from having a record year in 2018. Indeed, it was a very special year by any measure as the Port cracked the 8 million TEU mark for the first time. Significantly, inbound TEUs eclipsed the 4 million TEU barrier for the first time as well.
Cordero remarked that continued capital investments in on-dock rail upgrades, the completion of the Desmond bridge replacement and the completion of the final stage of the automated Long Beach Container Terminal have helped the Port stay in front of the cargo challenges.
Both the Ports of Los Angeles and Long Beach faced congestion problems earlier this year related to the high volume of import shipments arriving in anticipation of the imposition of tariffs on imports from China by the Trump Administration.
This led to delays in truck pick-ups and deliveries at container terminals and overcrowding at Southern California warehouses.
Cordero said that “there continues to be a chassis misallocation that needs to be addressed by a neutral gray pool so that there is a sufficient reserve to meet high demand periods.”
He said that the resolution “requires the political will among port stakeholders to address these bottlenecks and for the Port to be proactive.”
Port of Los Angeles
Port of Los Angeles, Executive Director Gene Seroka told a State of the Port audience in San Pedro that 2018 “was another year for the record books” with the Port moving 9.5 million TEUs, a 1.2% increase from 2017.
Seroka ascribed the success to the “strong collaboration” between longshore labor, terminal operators, harbor truckers and rail providers. Seroka said, the Port’s vehicle shipments declined by 34% in 2018, but scrap metal shipments rose by 26%.
The Port is expecting its cruise ship business to rise from 109 calls two years ago to 120 calls in 2019 boosting passenger counts to 620,000 in 2019.
Despite the strong showing in 2018 the increases may be slowing. The tally for the first two months of 2019, port volumes have increased 1.6% compared to the same period last year. However, the February imports dropped 9.1% to 348,316 TEUs compared to the previous year. And exports fell 9.5% to 142,554 TEUs, with empty containers up 16.3% to 214,436 TEUs.
However, the timing of the Lunar New Year, when production in some Asian countries slows, resulted in some cargo being shipped in January rather than February, possibly accounting for some of the slippage. “After the busiest seven months in the history of our port, the anticipated ease in cargo volume provides an opportunity for us to regroup with our stakeholders,” Seroka said. Adding, “With an uneven trade flow, we will be closely evaluating next steps for enhancing supply chain efficiencies.”
The Port of LA also completed several major building projects during 2018 including:
• The $127 million on-dock rail yard at the Yusen Terminal.
• $15.6 million Harbor Boulevard/Park Plaza improvement project.
• And the Port is actively involved in 15 zero and near zero emission projects totaling $80 million in grant funding.
Seroka also acknowledged the contribution of Tak Yokoo “and the team at Toyota for their leadership in advancing hydrogen fuel cell-electric truck technology here at our ports.”
Seroka said the new digital Port Optimizer will be able to “track 90-95% of our containerized cargo.”
Seroka told AJOT that the system will allow for better tracking of trucks, containers and chassis and increase the speed of pick-ups and deliveries of containers.
He said the investment in new digital technology also helps terminals, truckers and longshore labor plan for and move more containers in anticipation of the arrival of bigger container ships.
