A Shift Back to West Coast Ports

Remember those long lines of ships extending over the horizon in San Pedro Bay? The pandemic-induced dynamics that created them — along with dicey contraction negotiations between the International Longshore & Warehouse Union (ILWU) and Pacific Maritime Association (PMA) — eventually led to an eastward shift of port traffic. 

But in the midst of today’s geopolitical upheaval, extreme weather, and looming contract negotiations on the East Coast, those easterly winds are now again shifting west.

Here, we’ll take a look at some of the dynamics involved and what experts are saying about them.  

Rising Volumes in the West

Cited by Alejandra Salgado in a February 16 Supply Chain Dive post, Port of Los Angeles Executive Director Gene Seroka said in a media briefing that volumes at the Port of Los Angeles are rising as shippers divert cargo to avoid Red Sea attacks and drought conditions in the Panama Canal.    

“Recently, as I’ve traveled overseas shippers are beginning to tell me that they’re starting to reroute cargo over to the West Coast of the United States, and avoid these hotspots,” Seroka reportedly said, adding that both uncertainty and seasonal factors are playing a role.

In addition to these issues, there are growing concerns about a strike at East and Gulf Coast ports. 

In a summary of her coverage of the topic, CNBC’s Lori Ann LaRocco drills into three key issues at play: 

• “International Longshoremen's Association's six-year contract with the United States Maritime Alliance, which represents port terminal operators and ocean carriers on the East Coast, expires September 31.”

• “May 17 is the cutoff date set by the union for the local contracts to be agreed to so an overall master contract can then be negotiated for the largest union of port workers in North America.”

• “Historically, the ILA has been less likely to strike than West Coast union counterparts, but logistics managers are moving more freight away from the East Coast, on top of trade currently being rerouted as a result of the Panama Canal drought restrictions and Red Sea diversions.”

LaRocco also notes that negotiations for one-year contracts between U.S. importers and ocean carriers take place between March and April. While one goal there is to secure the best rates, some may be planning ahead to mitigate the impact of potential labor disruptions. 

Expert Perspectives

In her description of the westward trade shift, LaRocco includes perspectives from several industry leaders:

• Michael Aldwell, executive vice president for Kuehne + Nagel: "As a result of these uncertainties, our customers are telling us they need options, and they need options before it's a necessity to try and grab capacity. …So we're counseling our customers, take the opportunity while there's no congestion, while there's no risk. And it is playing out already. Move some of your cargo so you establish a transload supply chain via the West Coast."

• Paul Brashier, vice president of drayage and intermodal for ITS Logistics: "We are seeing a significant change back to the U.S. West Coast. …I would say 25% of our client's freight is coming back to the ports of Los Angeles and Long Beach." 

• Mario Cordero, executive director of the Port of Long Beach: "We are forecasting an escalation by the end of the year. …Just to put it into context, we moved 8.1 million [TEUs] last year. This year we believe we might get up to 8.4 million."

In a March 6 article for the American Journal of Transportation (AJOT), writer Stas Margaronis cites Lars Jensen, principal at Vespucci Maritime, who also underscores the westward shift. 

“If you look back to November last year before the Suez Canal disruptions, you already had some of the Asia to U.S East Coast services through Panama, being switched to Suez due [to] low waters in Panama,” Jensen reportedly said. “That added about a week of extra transit time to do that … Going around Africa only adds four to five days but that's four to five days on top of that additional week… It does give an advantage going through the West Coast, but it comes on top of the other factors that were shifted to the West Coast anyhow. You had a lot of cargo that naturally belongs to the West Coast that had shifted to the East Coast because of all the congestion issues that was going to shift back … Now you have the concern over the ILA labor negotiations, which on its own would also prompt a shift over to the West Coast… .”

4 Things Shippers Need to Know in 2024

Another expert weighing in on current dynamics is Mike Short, President of Global Forwarding at C.H. Robinson.

In a March 5 AJOT article, he describes four things shippers should keep in mind as they plan for the remainder of 2024:

1. Capacity changes may impact ocean rates: “…As global ocean carriers continue to build on their understanding of their costs, expected shipper demand, and impact to other trade lanes from the re-routing and shifting of vessels, ocean rates could decrease as we move throughout 2024. Geopolitical conflicts, demand, and other supply chain disruptors will be a big factor in rates and how long carriers choose to reroute vessels.”

2. Potential delays in and out of ports and rail terminals: “Extended transit times have affected arrival schedules, potentially resulting in vessel congestion, equipment constraints, and driver capacity challenges. …”

3. Selecting the right port will streamline U.S. surface transportation: “The U.S. surface transportation market is expected to tighten in the second half of this year due to capacity exits. …Overall, shippers should consider the total cost and transit of any shipment in making planning decisions. Switching from the East to West Coast in the third quarter of this year may improve ocean transit times, but it could also increase inland transit times and costs due to truckload capacity and lasting port congestion from Red Sea and Suez Canal disruptions. …”

Prioritize disruption planning in 2024: “There is no one-size-fits-all solution for supply chain disruption. Even when one conflict ends, a ripple of cascading impacts could last years. While shippers shouldn’t expect the same level of ongoing disruption this year that they experienced during the pandemic, they should still consider how these complex events can affect their supply chain and adjust their 2024 strategy accordingly. …”