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For years, the Port of Los Angeles has been the busiest container port in North America, with the neighboring Port of Long Beach holding down the second spot.
They’ve been a boon to the national and regional economy, with each port moving millions of containers annually, and with one in nine jobs in Los Angeles, Orange, Riverside, San Bernardino and Ventura counties connected to the San Pedro Bay Complex. Nationwide, according to the ports, the twin complex creates employment for 3 million Americans.
But their domination may be waning.
For the past three months, the Port of New York and New Jersey has been No. 1.
This rerouting of the U.S. supply chain is a bid to get goods to consumers faster and cheaper. The vast majority of foreign-made goods, from furniture and apparel to auto parts, all come to the United States on cargo vessels that unload at seaports.
L.A. isn’t happy about losing its title to its cross-country rival.
“We’ve got to get that cargo back,” Gene Seroka, executive director of the Port of Los Angeles, said in a recent press briefing.
RELATED: Cargo continues trending downward at Port of L.A., with slowest October since 2009
But nothing about this is new — and the trend was not unforeseen.
Since August, imports into the two major West Coast ports — Los Angeles and Long Beach — have declined.
Cargo volume at the Port of Los Angeles is down by 25% in the last three months compared to last year, and down by 17.3% on the five-year average. That cargo is now flowing into Gulf Coast ports like Savannah and New Orleans, and East Coast ports in New York and New Jersey.
In L.A. and Long Beach, where port officials have long talked about the need to ensure competitiveness amid multiple challenges – from shifting sea routes because of the trade war with China to the pandemic – that trend has sparked concern.
“In my entire time at the Port of Los Angeles, over nine years, there’s never been a time when both the Port of L.A. and Long Beach were out-performed by New York/New Jersey,” L.A. harbor Commissioner Ed Renwick said during a meeting last month, “so that’s a shocking development.”
The trend also doesn’t show signs of any immediate letup.
“The record levels of cargo continue,” Rick Cotton, executive director of the Port Authority of New York and New Jersey, said at a press briefing last month.
The reasons for the shift, meanwhile, are complex.
It stems, in part, from fears about an unresolved labor contract between the International Longshore & Warehouse Union and the Pacific Maritime Association. Around 20,000 dockworkers at West Coast ports, including Los Angeles and Long Beach, have been working without a contract since July 1.
Retailers are nervous that the lingering negotiations could lead to a strike, despite reassurances from both parties that this won’t happen.
A U.S. freight rail strike nearly sent the economy into a supply-chain spiral — raising the stakes for what a port strike could do. A dockworker strike, which both labor parties say they are adamant about avoiding, would cripple the West Coast and U.S. supply chain — sending even more volume and pressure to other, smaller ports on the East and Gulf coasts.
“This is pretty typical for these two groups,” Seroka said on CNBC on Monday, Dec. 5 “They’re going out on the far edge of negotiations, which should land us in about February or March of next year. It won’t get done this year, but there are seasoned negotiators on both sides of the table.”
At the Port of Long Beach, meanwhile, Deputy Executive Director Noel Hacegaba, said officials there were confident there won’t be a work stoppage.
“Port operations continue without disruption,” he said, “and we expect this to remain as the parties continue to work towards an agreement.”
But a drop-off in cargo at the L.A. and Long Beach ports was also expected this year because of an early peak season shipping schedule that brought fall and holiday goods into the twin ports during the summer months.
“What we saw was an earlier-than-normal peak season, the June-July numbers were off the charts, for seven months (numbers) rivaled last year’s record volumes,” Seroka told CNBC. “Then, the bottom dropped out.”
Add to that the uncertain economy and languishing labor talks – and an unsettled mood seems to have taken root.
But much of the concern, one retail industry leader said, is also still anticipatory.
“We’ve dodged a rail strike and the retail supply chain should be able to easily handle the remaining weeks of the holiday season,” Jonathan Gold, vice president for Supply Chain and Customs Policy at the National Retail Federation, said in a statement. “The uncertainty (is what) retailers and other shippers are afraid of.”
To a certain extent, however, proclaiming New York-New Jersey the new kings of cargo is a bit premature.
Before the bottom fell out, as Seroka said, the two Southern California ports had regularly broken monthly cargo records since the second half of 2020, when consumers shifted their buying habits amid the pandemic.
Last year, the Port of L.A., which has been the busiest U.S. port at the end of each year since 2000, became the first in the Western Hemisphere to surpass 10 million twenty-foot equivalent units – the standard measurement – in a calendar year.
A Port of Los Angeles spokesperson said on Friday, Dec. 9, that the port anticipates 2022 year-end numbers to be somewhere between 9.8 and 10 million, noting that December traffic has picked up somewhat.
The Port of Long Beach, meanwhile, moved 9.4 million TEUs in 2021 and had moved 8 million TEUs this year through October.
New York-New Jersey was well off those numbers last year, when it ranked third in the U.S. It would need to end this year with two strong months to catch LA this year and is in a tight race with Long Beach.
Through October, that port had moved slightly less than 8.2 million TEUs, according to data from the New York-New Jersey Port Authority.
It’s also difficult to separate the L.A. and Long Beach ports in terms of economic impact, despite technically being competitors. They share dockworkers, for example, and truckers often pick up and drop off cargo at both ports. They also work together on various initiatives, such as efforts to have an entirely zero-emissions truck fleet by 2035.
So even though the New York-New Jersey port moved the most cargo nationally each month from August to October, when taken together, the L.A. and Long Beach ports are still on top – by a lot.
In October, for example, New York-New Jersey moved 792,548 TEUS, according to that port’s data. The L.A. and Long Beach ports, combined, moved 1.3 million.
Still, New York-New Jersey’s cargo numbers for 2022, through October, were up 9.4% compared to last year.
The Port of L.A. was down about 6% and Long Beach was up only 1.5%.
And it’s not just New York-New Jersey the L.A.-Long Beach complex must worry about.
Adding to the shift to East Coast ports were lessons learned from a nightmare traffic scenario that played out in the Pacific Ocean during 2021’s peak holiday shopping season — resulting in empty shelves for retailers.
Goods became stuck off the coast of California. In January, there were a record 109 container ships in the queue, many waiting for weeks to offload – and some lingering as far away as south Orange County. Containers also piled up at the ports and overflowed at warehouses in the Inland Empire.
Retailers and importers cannot afford that kind of delay — and started shifting their supply chain routes to other US ports.
“I think there’s a real recognition of the need to have that diversification,” Gold said, “and not rely on one port versus another but have multiple ports they use.”
Trade routes are also shifting internationally.
While the Pacific Rim, primarily Japan and China, has fueled the West Coast ports over the past few decades, there are now other trade routes opening up from other parts of the world that make ports on the East and Gulf coasts more attractive. The trade war with China didn’t help matters.
And so ports on the East and Gulf coasts are now working to beef up operations – to handle more cargo.
The Georgia Ports Authority, for example, announced this week that it will break ground early next year to build two post-Panamax berths at its Ocean Terminal in Savannah. The Journal of Commerce, a trade publication, was the first to report that.
The multi-year, $350 million project is aimed at transforming what has been a break bulk terminal — designed to break up cargo loads — into a more full-service container facility.
On Dec. 7, the Journal of Commerce also reported that CMA CGM will acquire two terminals at the Port of New York and New Jersey. The East Coast port is CMA CGM’s largest gateway on that coast, and providing future capacity there is the goal.
As for the L.A. and Long Beach ports, until the labor dispute is resolved, it will be a challenge to lure importers back.
Earlier this week, there were just four cargo vessels at the Port of Los Angeles. In October, there were 20 canceled vessels coming into the Port of Los Angeles, with 20 more for November and December, Seroka said.
The New York-New Jersey Port, meanwhile, estimates 85% of its imports this year were supposed to go to the West Coast.
The financial implications for L.A. and Long Beach can be costly.
“If cargo is down 25% year on year, the jobs could be down right now 20% or 22%,” Seroka told CNN. “It may not be exactly one for one, but you’ve got a downstream (effect).”
With less revenue coming in, Seroka said, it limits investments in port infrastructure. The marine terminals pay taxes to the city, county and state — and, if business is down, that’s less revenue coming into those governments.
“The economic impacts are far reaching when it comes to us losing our traditional share (of cargo),” Seroka said. “That’s a real concern.”
Staff writer Chris Haire contributed to this report.
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