The neighboring ports of Long Beach and Los Angeles have dominated the trade between Asia and the U.S. for so long that the Southern California transportation community has come to believe it is its birthright.
However, an analysis of cargo trends over the past decade indicates this view is not only wrong, it is dangerous. The Southern California market share in the largest U.S. trade lane has been slipping since 2003.
Even worse, vacancies in the executive director positions in both Long Beach and Los Angeles, and very public discord among members of the Long Beach Harbor Commission, have raised concerns that today’s trickle of diverted cargo to East Coast ports could become a flood if the international trade community perceives there is a lack of leadership at the nation’s two largest container ports.
The Los Angeles-Long Beach market share of Pacific Rim containerized imports has declined from 56.5 percent in 2003 to 48.8 percent in 2012, according to Philip Davies, principal, Davies Transportation Consulting. Put another way, containerized imports at the nation’s largest port complex have declined an average of 0.8 percent a year since peaking in 2003.
Several macro trends in the industry can be cited for the loss of market share. The downward spiral began in the 2002 International Longshore and Warehouse Union contract negotiations when longshoremen began a series of crippling work slowdowns, and employers responded by locking the union out for 10 days.
The perception of an unstable work force on the West Coast continued over the past decade with numerous maverick work stoppages. The labor activism reached a peak during the past 12 months with strikes, work slowdowns or sometimes violent picketing by office clerical workers in Southern California and ILWU container and grain-handler workers in Oakland, Portland and throughout the Pacific Northwest.
Meanwhile, retailers this past decade have been expanding their warehouse and distribution presence in the eastern half of the country, where two-thirds of the population resides. At the same time, shipping lines surprised the trade this year by introducing several new services with large post-Panamax vessels from Asia to the East Coast via the Suez Canal.
West Coast ports are now bracing for additional possible diversion in mid-2015 when expansion of the Panama Canal will allow vessels with capacities up to 13,000 20-foot-equivalent units to transit the canal on what is considered to be the preferred route for all-water services from Asia to the East Coast.
The West Coast loss of market share continues. According to PIERS, a sister company of The Journal of Commerce, market share for the entire Pacific coast of North America, including Canada and Mexico, declined 2.3 percent in the second quarter compared to the second quarter of 2012.
The trend has been present all year. According to Drewry, the London consultancy, containerized imports in the first seven months of the year increased 8 percent at East Coast ports, compared with 1.9 percent at West Coast ports.
Even high-value, time-sensitive cargo, which is considered to be a lock for Los Angeles-Long Beach, is in jeopardy. Davies said the Southern California ports have lost market share in the low-, medium- and high-value cargo categories. Increasing costs and uncertainty surrounding the port environment are given as important reasons for the loss of market share.