Shortages at U.S. West Coast Ports are Redirecting Shipments to East Coast

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There has been a lot of discussion about U.S. West Coast ports losing market share to U.S. East Coast and Gulf Coast ports.

The Ports of Los Angeles and Long Beach were partially closed at the end of last week due to worker shortages. There was not enough labor on Thursday and Friday. The union released a statement stating the reasons why. On Thursday, the union had a monthly meeting and Friday, employees stayed home to observe the religious holiday. Both ports were back to being fully operational on Saturday.

More than 20,000 dockworkers on the West Coast have been working without a contract since last July. The International Longshore and Warehouse Union (ILWU) and Pacific Maritime Association (PMA) have been unable to come to an agreement on a new contract with the focus being on wages and the role of automation at the ports.

In the Pacific Northwest, terminals have cut back on hours due to softening volumes.

Unfortunately, this is not only impacting labor, but also exporters. Agricultural exporters are faced with delays and higher transportation costs. Drayage from the Pacific Northwest to Southern California is too expensive, considering the low margin of agricultural exports such as wheat, apples, dairy, hay, and other crops. Leaving limited options for most exporters to the Ports of Tacoma and Seattle.

On the Gulf Coast, the Port of Houston’s volumes are strong. For the most part, this is due to their export volumes in resins. Yet, the port is discontinuing their Saturday gate starting on April 29th as import demand continues to fall.

From the Port of Houston’s press release on March 29th, 2023:

“Though Port Houston experienced growth throughout the first two months of 2023, recently its terminals are beginning to see some softening in import demand consistent with the national trend. Sources indicate that high inventory levels and a general decrease in consumer demand are the main factors in this decline, and a general downward trend will likely continue over the next several months which was anticipated and included in the 2023 forecast budget. Export volumes in Houston remain strong, up 42% this month, driven by the strength of plastic resins and other petrochemical commodities produced in our region and delivered globally through Port Houston.” 

Container volumes tend to be a good macro indicator of global economic trends.

The past five months, U.S. ports have been experiencing steady volume declines. Marine terminals have reduced shifts or stopped weekend gate hours for longshore labor. Fortunately, port congestion is no longer a major issue and fluidity has been restored.

Imports are slowing but some are optimistic volumes will pick back up during the second half of the year. The largest factor will be how consumer spending is affected if the Federal Reserve continues to raise interest rates. It appears that ocean carriers remain positive demand will pick up. New ships are starting to be delivered and more have been ordered.