The gathering energy of the economic recovery has put pressure on ports for the same reason that your great-grandfather may have given for investing in real estate – no one is making more land.
Add governmental and environmental challenges that can add as much as a decade to the building of new facilities, and you can see why North America’s ports – especially on the West Coast – have had trouble keeping up with the growing flood of imports. (See AA, 5-1-21, P. 3).
It is hoped that imports will grow, and many of the congestion problems will be left behind, according a study of North American ports conducted by the industrial real estate firm of Cushman & Wakefield.
Imports into the United States are projected to rise by about 21% this year, the researchers point out, adding, “With congestion at most U.S. ports beginning to ease, the stage is set for strong port volumes and performance in 2021,” C&W said.
One impact of the surging demand during the pandemic was that the multi-year trend of freight shifting from the West Coast to East Coast ports slowed to a stop and the researchers don’t expect it to return anytime soon.
This reflected a desire for speed on the part of importers who were desperate to replenish goods that were flying off their shelves, C&W said.
“The gamble was that the shorter ocean voyage to the West Coast would result in a faster journey to retailer distribution centers. However, this did not always materialize given the substantial delays at Southern California ports.”
Good results were booked in 2020 on the inbound side at the largest North American port gateways. The California ports did well, especially Long Beach with 6% growth; and Vancouver at 5%. On the East Coast, Savannah and New York/New Jersey, the largest players, did the best at 4% inbound growth each.
Surprisingly, overall inbound loaded TEU volumes were reported up by only a modest 2%. Outbound loaded volumes were down on all coasts, in total by about 5.5%, C&W reported.
The researchers also assert that the future success of North American ports will be measured by their ability to overcome many of the same trends and operational issues that ports all over the world continue to struggle with.
For example, will American consumers revert later this year to their pre-pandemic emphasis on spending their disposable income on “experiences versus things?”
Household spending on travel, live entertainment and restaurants plummeted since early 2020. The share of U.S. consumption spent on all services fell by 7%, while purchases of goods grew a healthy 7% from Q4 2019 to Q4 2020,
Another significant trend involves North American importers having shifted sourcing away from China toward other Asian countries and Mexico. For example, U.S. imports from Vietnam grew by 27% a year in value from 2018 to 2020, while imports from China dropped in value by 10% a year.
C&W note that the U.S. East Coast is reached more cost effectively via the Suez Canal route than by a transpacific route transiting the Panama Canal or using a land-bridge via a West Coast port. If this this sourcing trend continues, volume will shift towards Atlantic versus Pacific Coast ports.
The company also said continuing service issues and port congestion could have a bigger impact the longer they last, although most, like the problems at the Panama and Suez Canals, are temporary.
“The question is, how rapidly will port congestion fade away?” C&W said. “In past crises, such as the West Coast dock strife in 2014-15, problems subsided quickly once a solution was reached. In the current case, a return to normal will largely depend on when import volume growth moderates.”