Posted on October 30, 2024
California’s ports and auto processors showing improvements in an uncertain market.
California ports and auto processors are reporting a mix of results for auto cargo, but generally indicating slight gains and a positive outlook.
For example, last year Port of Los Angeles surpassed the pre-COVID benchmark of 2019 (123,091 units) for the first time since the pandemic. The Port has one auto terminal that handles Infiniti, Mazda and Nissan vehicles. The 2023 volume was 156,340 units, compared to 110,965 for 2022, driven in part by additional imports from brands like Volvo and Kia. For the first half of 2024, auto imports at Port of Los Angeles were about 91,000 units, up 10% from the same period last year (83,000 units). Auto imports are expected to soften a little in the second half of 2024, still leaving Port of Los Angeles with a slight gain for the year.
A spokesperson for Wallenius Wilhelmsen, the auto processor at Port of Los Angeles, said the company’s global deep-sea auto volumes continued to grow from Q1 to Q2 driven by growing exports out of Asia. Inventory level increases, as OEMs are in the process of introducing new models, and potential impacts of tariffs against Chinese exports may cause more modest volume development in the latter part of the year. “However, global transportation capacity remains stretched and even if new capacity is added, the market outlook remains solid,” the spokesperson says.
Meanwhile, Port of Long Beach – which handles Toyota and Mercedes-Benz – came close to pre-pandemic volumes (302,811 in 2019) with 271,183 units in 2023, an 8% increase over 2022. Port of Long Beach says 2024 is on track for similar results as 2023, and the Port expects similar volumes in 2025 as well.
Port of San Diego – the largest Ro/Ro facility on the West Coast – with 362,554 units in 2023, is still far below the pre-pandemic benchmark year of 2019 (520,637 units), although 2023 numbers represent a 5.2% increase over 2022. Preliminary estimates for 2024 show Port of San Diego – which handles VW Group, Glovis, Toyota, Ford, Stellantis, GM, Honda and Isuzu – with a minor decrease of -3.2% over last year.
Pasha Group, auto processor for Port of San Diego, adds, “U.S. light vehicle sales are expected to see incremental growth over the next few years, with U.S. growth rate lagging behind Asia’s growth rate.”
Driving Factors
California ports and processors cite several factors impacting the auto cargo sector. Marcel VanDijk, Port of Los Angeles Marketing Manager, says that lowering interest rates and inflation in the U.S. will encourage auto purchases, which drive imports.
Wallenius Wilhelmsen points out, “During Q2 there was a build-up in inventories globally and we are now likely proceeding towards a market where sales need to support production, as much of the sales backlog seen in recent years have been absorbed.”
VanDijk adds that changing demands for traditional gas vs. electric vs. hybrid vehicles has an impact but that outlook is uncertain, because it depends on which political party wins the upcoming U.S. election.
“I would say that stability in policies would be very welcome in this industry,” VanDijk adds.
VanDijk also notes that the recent ILA strike on the East and Gulf Coasts has not impacted auto imports at Port of Los Angeles. “You don’t see a diversion of whole ships that were bound for the East Coast coming to Port of Los Angeles because our labor would be sympathetic to the labor issues on the East Coast,” he asserts.
Environmental Concerns
VanDijk says one of the biggest challenges California ports face today, with regard to auto cargo, is the state’s new environmental laws. The Ocean-Going Vessels At Berth Regulation, mandated by the California Air Resource Board (CARB), requires that each vessel visit to a regulated California port or marine terminal must use a CARB Approved Emission Control Strategy (CAECS).
CARB states, “The purpose of the regulation is to reduce hoteling (or at-berth) emissions and associated health impacts from diesel auxiliary engines onboard vessels docked at California ports.” Under the rule, emissions must be captured while Ro/Ro vessels are at berth starting January 1, 2025.
VanDijk says the best way to comply with the CARB regulation is to use ship-to-shore power when unloading auto cargo. This means vessels use landside electricity while at berth instead of running diesel-fueled auxiliary on-board engines. Port of Long Beach says shore power cuts air pollution from ships at berth by 95%.
VanDijk adds that this requirement is a financial burden for the port and the terminal. Pasha Group agrees, “Infrastructure planning takes time and a large amount of capital, and retrofitting vessels is also a long, expensive process for vessels that do not have to comply with these regulations outside of California. Ro/Ro vessels charter worldwide and may only visit California once in the vessel’s life.”
Despite this challenge, however, in early October Port of Los Angeles announced that air pollution from its operations is at its lowest level since 2005, the first year the port began tracking emissions. In addition, 2023 was the Port’s best year for reducing greenhouse gases (GHGs), which are down 24%.
Shaper class rendering of a WW vessel.
EV Challenges
Another emerging auto cargo challenge is the safety issue relating to electric vehicle (EV) batteries.
This concern has been in the headlines recently. In September, a truck transporting lithium-ion batteries overturned in San Pedro near the Port of Los Angeles, causing a fire that continued to burn for days, closing some terminals and disrupting port operations.
The need to keep EV batteries charged through the duration of the shipping process is also a challenge. Wallenius Wilhelmsen explains that an electric vehicle’s state of charge (SOC) is one of the key data points that is measured as an EV moves through the supply chain. On average, a battery’s SOC depletes by 1% for every 10-12 days it spends at one of the company’s facilities.
Clearly EVs are transforming how auto cargo must be handled. A spokesperson for Wallenius Wilhelmsen explains, “Our staff receives special training around handling EV batteries and other components that present unique safety risks compared to traditional combustion engine vehicles. In addition, we work with our customers to identify a state of charge threshold that ensures vehicles remain charged throughout their journey from factory to dealer without requiring any unnecessary charging.”
