In recent years, a major economic shift has been underway at U.S. ports. The longtime dominance of West Coast ports has started to slip as major market changes are moving the advantage to the East Coast. The Port of Los Angeles remains No. 1 in the number of 20-foot cargo containers, or TEUs, that are unloaded from ships and transported around the country. The Port of Long Beach isn’t far behind, ranking third in the country for TEUs.
Both ports, however, had fewer cargo imports in 2022, with Los Angeles down nearly 11% and Long Beach backtracking by 7% from their record-setting numbers of 2021, according to global trade software Descartes Datamyne. These West Coast losses appear to be to the East Coast’s gain.
The Port of New York and New Jersey, which ranked No. 2 in the country for TEUs imported in 2022, was reportedly the busiest port in the nation at the end of last year. According to Descartes Datamyne, cargo volume at the East Coast hub was up about 4% during the year. If this trend continues, the Big Apple may soon take the crown as the nation’s busiest port.
“The Port of Savannah is the fastest-growing port in the country and there’s a lot of reasons for that. The port is likely, within the next five to six years, to be the busiest on the East Coast.”– Britton Burdette, senior managing director of capital markets, JLL
And New York is just one example. East Coast and Gulf Coast ports, such as Houston; Norfolk, Virginia; Charleston, South Carolina; and Savannah, Georgia, are experiencing strong growth. Houston’s cargo imports shot up by 15.5% last year alone, making it the fifth-largest port in the nation. Savannah, which reported annual cargo volume of 5.9 million TEUs, has quietly become the second-largest cargo port on the East Coast.
Britton Burdette, an Atlanta-based senior managing director of capital markets for JLL, says that unlike the Port of New York and New Jersey, which is hemmed in by urban development, Savannah has a large amount of room in which to expand. Port officials there estimate having the capacity for 9.5 million containers by 2025. And more may be on its way as Burdette says there is talk of expansion to handle up to 12 million containers annually.
“The Port of Savannah is the fastest-growing port in the country and there’s a lot of reasons for that,” Burdette says. “The port is likely, within the next five to six years, to be the busiest on the East Coast.”
There are various reasons why the eastern seaboard has become a stronger competitor to the once-dominant West Coast. The population and business communities in the Southeast continue to grow much faster than other parts of the country, so products delivered to these ports are much closer to many population centers. This shift has also become more affordable since the Panama Canal was widened in 2016, making it able to handle the much larger cargo vessels now in use.
The COVID-19 pandemic also played a major role as a massive backlog of cargo ships waited to unload at the Los Angeles and Long Beach ports, a situation that has subsided more recently. These bottlenecks forced shipping companies to look at alternatives for moving cargo to their destinations more quickly. On top of that, ongoing labor negotiations at West Coast ports were creating concerns about a strike that would keep ships from being unloaded.
“A lot of shippers were concerned that if there was a shutdown at the West Coast ports, their products would just be sitting at anchor at sea,” says Spencer Shute, principal consultant for Proxima Corp., a supply chain and procurement consulting firm. “So, companies started shifting cargo to other ports just to make sure that the flow of cargo could continue.”
These strikes never materialized and West Coast unions reached a tentative agreement with port operators and shipping companies this past June. But worries about potential disruptions have continued.
Another trend that may be a minor factor now — but could become more important in future years — is the movement of some manufacturing activities out of China and to other countries. This trend began a while ago due to the contentious relationship between the U.S. and China, but it gained steam during the pandemic. Manufacturers relocated to countries such as Vietnam, Malaysia, Bangladesh and India. These moves often make transportation routes through the Suez Canal to East Coast ports a better option.
Even as the West Coast bottlenecks ease and labor issues calm down, Shute says that cargo volumes have not fully returned. He contends that many shipping companies have found the capabilities of East Coast ports to be much better than expected, so they will continue to push their advantage. Recently, yet another unexpected problem has developed that may end up helping West Coast ports, at least in the short run. Central America is experiencing a severe drought, forcing officials to reduce the shipping traffic through the Panama Canal.
“Most cargo goes from Asia to the East Coast through the Panama Canal,” Shute says. “But that area is being hit with severe droughts to the point where the water level in the canal is very low, so there is some concern about getting the big cargo ships through.
“Those ships must pay additional fees because of the water usage. Not only are you seeing elongated transit times for using the canal, but also costs are increasing. That is forcing shippers to go back to the West Coast, which is more cost effective.” ●