Why ‘There’s Still Too Much Freight Going Over the West Coast’
Diverting ocean cargo to the East Coast became a popular tactic for shippers working around West Coast port congestion and labor problems. But that trend may not stop even if disruptions do.
According to data from the McCown Report, a monthly report of container volume at 10 major U.S. ports, containers entering the West Coast accounted for more than 57 percent of total inbound volume in January 2017—but this number has since dropped to under 50 percent last month.
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Container shipping industry veteran John McCown, who is the co-founder and former CEO of freight brokerage Trailer Bridge, Inc., attributes this ongoing shift to cost economics, with most of the U.S. population clustered on and around the U.S. East and Gulf Coasts.
“The absolute only advantage that the West Coast intermodal route has is speed, and I don’t diminish that,” McCown told Sourcing Journal. “But when you start to compare that versus the economic costs, the emissions, the congestion on the West Coast and the threats of a strike, that just makes it easier for [shippers] to say, ‘Let’s go ahead and make that switch permanent, or let’s switch more of our cargo.’”
McCown said that although the congestion and the labor disruptions forced cargo volume east prematurely, this represents more of a “frontloading of what would have happened anyway over a longer period of time.”
Data from supply chain visibility platform FourKites showed that the rerouting ramped up to kick off 2023. Sixty percent of import shipments arrived on the East Coast in February, but that number increased to 68 percent just four months later as labor disruptions threatened West Coast ports.
For the next few months, McCown expects a bounce back for the West Coast with a new six-year tentative labor deal in place for union dockworkers. But don’t expect the balance to return to pre-pandemic numbers, he said.
“If you look at the population distribution, and if you were to examine the port of entry, and have an algorithm that monitors total ocean miles, ocean costs per mile, rail miles and rail costs per mile and final product delivery, I can assure you’d conclude there’s still too much freight going over the West Coast,” McCown said.
He also noted that shippers must account for the likely introduction of new carbon tariffs in coming years, which will only inflate the cost equation.
McCown wants the U.S. federal government to develop a comprehensive national port strategy detailing where inbound containers should enter the U.S., with factors related to costs, emissions and congestion being the only guideposts.
As such, he says the government must address an obvious long-term problem—dwindling port capacity that can’t handle surging container imports.
Expanding current port gateways should be a major portion of such a strategy, he argues, particularly since he expects inbound containers to double in 25 years. According to data collected by McCown, twice as many inbound containers reside at U.S. terminals as they did in 1995.
By 2048, McCown says the U.S. will need additional terminal capacity equal to 5.4 times the Port of Los Angeles’ current volume. In 50 years, he projects that at 16.1 times that port’s current volume.
“We need to focus on that long term, and immediately recognize that we can’t handle twice as many containers with basically the same terminals that we have now,” McCown said. “That’s where I think people have been lulled into this inactivity. The reality is…that we’re going to need new terminals, and in the absence of new terminals, you know, as growth inevitably occurs, we’re going to start bumping against those those problems.”
One such East Coast recent expansion has come at the Port of Savannah, where a major container berth reopened Thursday. The Berth 1 project adds 1.5 million 20-foot equivalent container units (TEUs) per year of berth capacity, or 25 percent, for a total of 7.5 million TEUs per year for the port.
The berth will now be able to support two vessels with capacities of 10,000-14,000 TEUs simultaneously or one 20,000-TEU vessel. With the addition, the Georgia port can serve four 16,000-TEU vessels at the same time, as well as three additional ships.
The McCown Report pointed out that container imports into the U.S. declined 19.6 percent in June, the fifth-worst year-over-year drop since it starting tracked the data in January 2017. But the stretch from February to May 2023 represented the four worst months, with McCown anticipating that container import volume will move out of double-digit declines by August.
