Season of the Switch

FTR Associates transportation analyst Larry Gross showed a revealing chart at The Journal of Commerce Inland Ports Conference in Chicago last month. It concerned the much hashed-over issue of competition between East and West Coast ports for U.S. container imports, but looked at the issue in an entirely different way.

Nodding only in passing toward the questions of the long-term market share of each range (he says the East and Gulf coasts seem to be very slowly taking market share from the West Coast, although that has stabilized over the past year), Gross instead finds the most significant changes in market share occur within a single year, rather than over the course of several years.

He showed port throughput data indicating East Coast ports gain share during the early part of the year, when transit time urgency tends to be lower, only to lose that share back to West Coast ports during the peak season when shippers are rushing to ensure merchandise makes it onto store shelves.

The data thus indicates shippers still see the West Coast, with its multiple-day advantage over the East Coast for landing goods on U.S. shores, as offering opportunities to accelerate shipments. Moreover, if the last three years can be considered a trend, the picture seems to be accelerating. In 2008, 2009 and 2010, East and Gulf Coast ports had a 1 percent, 1.7 percent and 2.2 percent higher market share, respectively, in the January-April period of the year over the May-December period.

“What it tells me is that more and more shippers are choosing to take advantage of the economics of the all-water during the slack periods when service is not as much of a concern,” Gross said.

He said the data is from imports overall, not just imports from Asia, although Asia and particularly China (which alone accounted for 45 percent of all U.S. container imports in the first quarter of 2011, according to JOC sister company PIERS) remains by far the largest source of containerized imports into the U.S.

“Some of what is going on is a change in routing that occurs seasonally,” Gross said.

At the same event, Michael DelBovo, senior vice president at contract logistics provider Saddle Creek, said it’s understood West Coast shipments accelerate during the peak months. “Definitely during the slow time of the year, we’re seeing more containers coming to us from the eastern side and then when it gets busy it comes more from the west,” he said.

The intra-year shift isn’t extreme, and with the East and Gulf coasts handling nearly 44 percent of imports during the last eight months of 2010, it’s clear significant import volume is now moving to the East Coast, mostly via the Panama Canal, because of port diversification and other strategic efforts by shippers.

Last year, the East and Gulf coast share of imports dipped from 46.1 percent in the first four months to 43.9 percent in the last eight months, Gross’s figures showed. Some shippers said it doesn’t apply to them. “It is of no bearing at all and I’ll tell you why,” one shipper said via e-mail. “If you do the analysis between (mini-landbridge, or rail across the U.S.) and all-water through the canal, there is very little if any time saved by moving freight via MLB as compared to all-water, but the mark up is anywhere from $600 to $1,000.”

A West Coast bias during the peak season sounds right. The fastest route to the U.S. interior is the West Coast by several days, and a well-developed transload infrastructure can get goods quickly moving by truck to interior locations.

As speakers at the Inland Ports event showed, distribution centers tied to rail intermodal operations linked to seaports through regular double-stack rail departures, also will provide fairly consistent service and access to a broad distribution network.

Peter Tirschwell is senior vice president for strategy at UBM Global Trade. Contact him at ptirschwell@joc.com, and follow him at twitter.com/PeterTirschwell

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