As overall import levels continue to rise and the peak shipping season begins, shippers have been routing more traffic away from California and toward ports on the Atlantic Ocean and the Gulf of Mexico.
This trend has been ongoing for quite a while (I first noted it last October), but a new piece in the Journal of Commerce explains the issue in full. There are many more ports on the East Coast and the Gulf Coast than on the West Coast, but each of them has a much smaller capacity than the Los Angeles/Long Beach complex that handles most West Coast shipping.
The JOC article says that while West Coast imports declined by 3.5 percent in the first five months of 2022, East Coast imports increased by 6.1 percent and Gulf Coast imports increased by 21.3 percent. That’s causing congestion. According to DHL, Houston, Savannah, New York/New Jersey, and Norfolk are seeing significant congestion, while Miami and Charleston are doing well for the time being.
These ports usually don’t see significant congestion at all, which presents new challenges for port authorities. According to the JOC, the story is the same as on the West Coast. Containers are piling up onshore, and storage space is running low. Empty containers are also stacking up, reducing capacity and causing backups.
One advantage that many East Coast ports have over Los Angeles/Long Beach, from an organizational perspective, is that they are run by state-level authorities, rather than the relatively small and dysfunctional municipal governments of Southern California. The ports are treated as assets for the statewide economy, and expansion projects are usually better managed. The Port of Virginia has invested in some forms of automation, leading to very high productivity compared with other U.S. ports. The Georgia Ports Authority has invested heavily in expanding the Port of Savannah’s container capacity, and the Alabama Port Authority is investing in its intermodal capabilities at the Port of Mobile.
These ports could become much more important in the near future, as labor negotiations threaten to disrupt operations at Los Angeles/Long Beach. East Coast and Gulf Coast dockworkers are represented by a different union with totally different labor contracts than on the West Coast. As recent events around the world have shown, unions have no qualms about making supply chains worse, and shippers have good reason to be skeptical of the sunny claims that no work stoppages are forthcoming. With automation at issue, and the self-styled “most pro-union president” in the White House, the West Coast dockworkers know they have leverage, and they’re not hesitant about using it.
Regardless of those negotiations, California’s AB5 law is now in effect for trucking, which will certainly disrupt transportation once containers get onshore. It’s probably smart to avoid California right now, which means our East and Gulf Coast ports will likely need to step up even more in the coming months than they already have.