Los Angeles-Long Beach continues to dominate the U.S. import trade from Asia, but Southern California’s market share of containerized imports has declined on average 0.8 percent per year since 2003, according to an industry consultant.
“Overall, the Los Angeles-Long Beach market share of Pacific Rim containerized imports declined from 56.5 percent in 2003 to 48.8 percent in 2012,” Philip Davies, principal, Davies Transportation Consulting, told the Metrans International Urban Freight conference on Oct. 9 in Long Beach.
Davies said an analysis of trends in containerized imports based on shipment origins and destinations, transportation costs, commodity type and commodity value point to the increased cost of shipping through Los Angeles-Long Beach as the main reason for the steady decline in market share.
“The broad-based nature of the decline in Los Angeles-Long Beach market share suggests that cost increases over the last decade have affected traffic in almost all product groups, regardless of product value or service advantages offered by the Southern California ports,” he said. The decline in market share could continue.
Indeed, the decline has continued into 2013, not only for Los Angeles-Long Beach, but for West Coast ports as a region, according to a report this week by the London consultancy Drewry.
All-water services from Asia to the East Coast, buoyed by new services via the Suez route, resulted in an 8 percent increase in containerized imports in the first seven months of 2013. Imports from Asia moving through the West Coast increased only 1.9 percent during the same period, Drewry stated.
“According to ocean carriers, the new all-water services introduced via Suez earlier in the year have been a success with customers,” Drewry said.
The decline in market share in Los Angeles-Long Beach can be traced to the 2002 West Coast contract negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association. Work slowdowns by the ILWU precipitated an employer lockout that shut down the entire coast for 10 days.
National retailers, concerned about concentrating such a large percentage of their imports at West Coast gateways and especially in Southern California, established a number of import distribution centers on the East Coast.
Meanwhile, transportation costs were increasing steadily in Los Angeles-Long Beach. Intermodal shipments transiting the Alameda Corridor incur a fee, as do shipments trucked from the port complex during the peak daytime hours. Revenues from the PierPass traffic mitigation fee generated during the daytime hours are used to help offset the increased costs terminals incur for adding up to five night and weekend gates each week.
The Los Angeles-Long Beach port complex became a victim of its own success. Intermodal traffic could not have increased at the rate it has had the Alameda Corridor not been built to speed trains through the large metropolitan area. Also, since the ports can not handle their volume of more than 14 million 20-foot container units each year with an 8 a.m. to 5 p.m. schedule five days a week, night and weekend gates are crucial to accommodating the cargo load.
However, these improvements have come at a cost to cargo interests, and have chipped away at the ports’ discretionary cargo including some low to mid-value shipments. The Southern California ports have hypothesized that their speed to market from Asia, with multiple daily ocean and rail services, would reduce importers’ inventory carrying costs enough to offset the lower all-water service costs to the East Coast, but that has not been the case.
“The loss of market share by Los Angeles-Long Beach is not limited to low-value commodities. It applies to all major product groups, with the exception of vehicle parts and footwear,” Davies said.
Importation of vehicle parts could provide the Southern California ports with guidance in targeting cargoes where they have a compelling advantage. Davies noted that imported vehicle parts are destined primarily to automobile manufacturing plants in the Midwest and the Southeast. Ocean shipping services with rapid transit times and daily intermodal rail services from Los Angeles-Long Beach to those destinations are crucial to the just-in-time manufacturing model in the auto industry.
“The example of vehicle parts imports shows that traffic routing for some products can be decisively influenced by service characteristics,” Davies said.