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WEST COAST PORTS STRUGGLE WITH TRADE TENSION, PANDEMIC; AIRPORTS SHOW SIGNS OF LIFE, BUT WONDER IF IT WILL LAST
October 12, 2020
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The Port of Vancouver, the largest Canadian gateway, registered a decline in container volume in the first six months of 2020. The port is in the process of expanding its Centerm container facility to raise its capacity from 900,000 TEU to 1.5 million.

Despite the brakes on the US economy and blanked sailings, the port of Oakland registered 1.9% growth in loaded import volume in June. The result surprised even the port authority, which had braced itself for decline as shipping lines cut their scheduled visits to the port by 10%.

 

Oakland’s overall container volume slipped 2.3% from June 2019, which the authority attributed to the impact of the Covid-19 pandemic on global trade. It regards the June spike as a result of importers speeding up traffic to beat anticipated capacity bottlenecks and rate hikes.

 

The longer-term picture remains grim. Gene Seroka, executive director of the port of Los Angeles, painted a gloomy picture on a media call, where he pointed to the impact of the pandemic and the US-China trade conflict on supply chains and the port’s throughput.

“We believe the effects of these two items will last throughout the balance of 2020,” he said.

 

Los Angeles handled 691,475 TEU in June, down 9.6% year on year. Seroka expects a 15% drop for the full year.

 

At the port of Long Beach, container throughput was down 11% from June 2019 levels, bringing its tally for the first half of the year to 6.9% lower than in the first six months of 2019.

 

Up the coast, the Northwest Seaport Alliance (NWSA) of the ports of Seattle and Tacoma did not fare any better. 287,036 TEU handled in June meant a drop of 16.4% from a year earlier. For the first half of the year the NWSA is down 18.3% in container throughput, the same rate of decline as its inbound TEU count.

 

NWSA CEO John Wolfe expressed hope that the second half of the year may improve results, noting that container lines have announced fewer blanked sailings than during the spring. Still, the port faces a structural decline from the China-US tensions, which have accelerated the shift of US importers from China to origins in Southeast Asia, which are more favorable to routes serving US East Coast ports, he noted.

 

In addition, NWSA faces strong competition from the Canadian West Coast ports. Vancouver, the largest Canadian gateway, also registered a decline in container volume in the first six months of 2020, but at 7.7%, this was a less severe drop than NWAS’s.

 

Both Canadian ports are bent on ramping up their capacity. Prince Rupert, which was the fastest growing port on the West Coast last year with a 17% rise in throughput, is poised to kick off work on a C$2 billion (US$1.487 billion) expansion project to boost its capacity from currently 1.3 million TEU a year to 1.8 million. The expansion is scheduled to be completed in 2022.

 

Vancouver is in the process of expanding its Centerm container facility to raise its capacity from currently 900,000 TEU to 1.5 million. These efforts are flanked by investment to raise on-dock rail capacity and improve rail access to the ports.

 

Down the road, both Vancouver and Prince Rupert are planning to build new container terminals of about 2 million TEU capacity, which would come on stream towards the end of this decade.

 

The port of Seattle is spending US$300 million on modernization work on its Terminal 5, which will include deepening of the berth, improvements to the on-dock rail yard and the acquisition of super post-Panamax cranes. The first phase of the project is due for completion next year, with the second phase expected to be ready in 2023.

 

In California, the port of Oakland is about to ramp up its game with the acquisition of three large cranes. They can reach 125 feet across a deck, spanning 24 rows of containers, and lift them 174 feet to stack up to 12 on top of each other. They are expected to be operational in January.

 

Despite large volumes of personal protection equipment (PPE) flown in from Asia, throughput at Los Angeles International Airport (LAX), the West Coast’s leading airfreight gateway, was flat in May. While this was better than New York and Miami, which suffered double-digit slumps in tonnage, LAX was eclipsed in its own back yard by Ontario International Airport, the second-largest airport for the region. Ontario’s cargo throughput was 30% higher than 12 months earlier, driven by strong import traffic. Located close to the Inland Empire, which boasts a large cluster of warehouses, Ontario is a magnet for freighter operators, including UPS, which runs its main West Coast hub there.

 

At the beginning of July American Airlines announced that it would no longer be using LAX as an international hub, a consequence of its expectations to operate international long-haul capacity next year at a level 25% lower than in 2019. The airline will drop its flights from LAX to Hong Kong and Beijing and is seeking government approval to shift its LAX-Shanghai service to Seattle.

 

In addition, American is going to cancel flights from LAX to Sao Paulo and Buenos Aires, a move that trims capacity for airfreight flows between Asia and South America.

 

Since the lockdown measures against Covid-19 LATAM has suspended its passenger flights to LAX, but it has maintained cargo service through five weekly flights. A combination of Boeing 767 freighters and 787 passenger aircraft used for cargo flights produces 350 tons of weekly capacity between the West Coast and South America.

 

Initially Asian transit cargo was one of the reasons for LATAM’s service, but it has concentrated on US traffic, due to a drop in Chinese demand for perishables, reported Kamal Hadad, LATAM Cargo’s alliances and network director.

 

Airlines flying between the West Coast and Asian points have to rely largely on cargo from the area for their westbound loads. The capacity influx caused by high demand in the US for PPE has depressed outbound rates to a point where trucking costs to feed freight from further away cannot be absorbed, one Asian airline executive said.

 

Neither ports nor airports along the coast are bullish on their near-term prospects.

 

By Ian Putzger

Correspondent | Toronto

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