Shippers not surprised by shift in ocean cargo vessel calls away from West Coast

New evidence that U.S. West Coast ports are losing market share to ports in the East and some Gulf regions surfaced in a new report issued by Zepol, a global trade and intelligence provider.

“Shipments are setting sail for Eastern ports even before the Panama Canal expansion is complete,” says Zepol’s CEO, and trade data expert, Paul Rasmussen. “Shippers may be tired of West Coast backups, and with carriers adding more lines from Asia to the East Coast, it’s hard to blame them.”

Researchers recently found that a “hefty chunk” of businesses have switched from using Pacific to Atlantic and Gulf ports this year.

Total imports along the East Coast have increased by 15 percent, while import traffic on the West Coast is down 4 percent, says Zepol.

The news did not come as a surprise to most shippers, however. Bruce Carlton, president of the National Industrial Transportation League, told Logistics Management in an interview that U.S. West Coast congestion last year caused many shippers to rethink their distribution strategies.

“A lot of shippers – both importers and exporters – are angry.  Really angry,” he said. “They understand the congestion and slow throughput could not be laid on just one or two reasons, like the nine-month labor contract to name one.” 

But they feel like they got “burned” because others were not doing their jobs well enough, Carlton added.

“Big importers in particular are heavily invested in warehouses, distribution centers and contractual obligations with a host of service providers,” said Carlton. “They can’t simply pack up and leave.”

But prudence dictates a very thorough examination of what they can do differently down the road, added Carlton, and he expects some degree of new sourcing patterns to reduce or at least spread their risk.
“Meanwhile, the pressure is on the ports, terminals, carriers, alliances, chassis pools, unions, railroads and just about every other element of the supply chain to get it fixed,” said Carlton.

The ports of Newark/New York, Savannah, and Houston had the highest increase in imports for the first half of 2015 (compared with the same time in 2014). The Port of Newark/New York increased in imports by 12 percent, Savannah rose by 32 percent, and Houston by another 26 percent. The port of Houston also had a surge in containers from China. The port brought in 53 percent more Chinese containers already this year.

“Looking at these numbers, the port of Newark/New York’s imports are becoming competitive with Long Beach,” says Zepol’s Rasmussen. “Upgrades to the Suez Canal and the focus on larger vessel infrastructure at Eastern ports certainly help pull traffic away from the Pacific.”