Los Angeles/Long Beach: Competition heats up for America’s gateway

Los Angeles/Long Beach wasn’t always the container gateway to America. That crown used to belong to New York/New Jersey. Containerization combined with rising imports from Asia and transcontinental rail swung the pendulum to the West Coast over recent decades — although now the pendulum is swinging back to the east.

The first American trading ship called in California’s San Pedro Bay in 1805. By the time California became the 31st state in 1850, port activity was flourishing. Los Angeles’ population surged in the early 20th century and boosted business further. The main channel was dredged in 1912, two years before the Panama Canal opened.

As shipping switched to containers in the 1960s and 1970s, the East Coast retained its dominance. According to historical data from the Bureau of Transportation Statistics (BTS), East and Gulf Coast ports still handled 66% of the country’s containerized trade in 1981. It wasn’t until 1989 that the West Coast took the lead, according to the BTS data.

Data on the East Coast/West Coast split is also compiled by the McCown Report, covering the country’s top 10 ports. According to McCown, the West Coast’s share of imports had risen to 65% by 2000. Los Angeles/Long Beach handled 4.9 million twenty-foot equivalent units that year, more than triple New York/New Jersey’s volumes.

At the turn of the century, Los Angeles/Long Beach had clearly taken the crown. But the contest was far from over.

East Coast claws back market share

American imports from overseas surged and the size of container ships escalated. Between 2000 and 2015, imports to Los Angeles rose 57%. Over the same period, New York/New Jersey container imports rose 113%; those to Savannah, Georgia, by 288%; to Norfolk, Virginia, by 90%; and to Houston by 148%.

In 2015, the West Coast’s share of the top 10 ports’ imports had pulled back to 57%. Then came the opening of the expanded Panama Canal, allowing larger vessels to transit from Asia to the East Coast, and the gap between the coasts narrowed even further. By last year, the East Coast had a 49% share.

According to McCown, “The transition from East/Gulf Coast ports representing 36.5% of total inbound volume in 1995 to 43.3% in 2015 — the last full year before the expanded Panama Canal opened — was equivalent to an average shift of 34 basis points per year.

“The subsequent change from 43.3% [in 2015] to 48.8% in 2021 was the equivalent of 92 basis points per year, underscoring that a canal allowing container ships more than three times larger is accelerating a shift that will continue.”

During a 2020 interview with American Shipper, Deutsche Bank transportation analyst Amit Mehrotra maintained that the pull of the East Coast was a secular trend. “Keep in mind that 60% of the population lives east of the Mississippi,” he said. “At the end of the day, if you come into the West Coast, you’re going to have to rail a lot of it east, to where the demand centers are.

“With the expansion of the Panama Canal and the port projects on the East Coast that allow for bigger ships, and with the majority of the population in these states, it disproportionately favors the East Coast ports.”

The COVID era and what’s next

The COVID area has brought more changes. In the first half of 2021, as shippers raced to bring in more cargo, Los Angeles/Long Beach gained favor. Then congestion exploded in Southern California. More cargo shifted to the Panama Canal route. And concerns over the outcome of the West Coast labor negotiations gave another advantage to the East Coast.

In the three months through April, the East and Gulf Coast actually took a slim lead, with a 50.2% share. Even so, Los Angeles/Long Beach remains by far the single biggest gateway, with double the import volume of New York/New Jersey.

Looking forward, McCown believes the East Coast option makes more sense for many importers.

“When I started working at McLean Industries in 1980, the trans-Atlantic trade for U.S. Lines was almost as big as the trans-Pacific trade,” he told American Shipper.

“The other big factor [beyond rising Asian imports] that helped the West Coast was the growth of double-stack train service, which allowed the Eastern population centers to be reached faster than all-water service [via the Panama Canal].

“But from a pure cost, emissions and congestion standpoint, today way too many boxes come over the West Coast,” argued McCown, who believes that “if you solve just for those three factors and ignore transit time, only around 25% of inbound boxes should come in via the West Coast.”

Source: freightwaves - Los Angeles/Long Beach: Competition heats up for America’s gateway
Editor: FreightWaves Staff