Posted on January 17, 2024
U.S. importers are rediscovering the lure of Southern California ports.
Trade is swinging back to the ports of Los Angeles and Long Beach after a period in which pandemic-driven shipping disruptions and broader shifts in manufacturing pushed supply chains more heavily toward Gulf Coast and East Coast ports.
The Southern California ports in September, October and November recorded year-over-year increases in containerized imports of between 17% and 31%, according to ports data. At the same time imports fell at East Coast gateways such as Georgia’s Port of Savannah and the Port of New York and New Jersey.
Logistics executives say the neighboring Southern California ports, long the anchor of U.S. supply chains built on trade with Asia, are winning back business in part because of improved labor relations with dockworkers following resolution of long-running contract talks last year.
More recently, disruptions at the Panama Canal and the Suez Canal, both of which feed East Coast and Gulf Coast ports, have led importers to route their goods through California to avoid longer transit times and higher costs.
For many importers, California ports are cheaper and easier to ship through because they are closer to Asia and have extensive truck and rail connections to other parts of the country, said Jamie Bragg, chief supply-chain officer at Tailored Brands.
The parent company of Men’s Wearhouse and Jos. A. Bank diverted most of its imports from Southern California to Houston during the pandemic.
Bragg said the longer sailing time and higher costs to ship to Texas through the Panama Canal were worth it to avoid California, where a massive backup of containerships delayed cargo in 2021 and 2022 and contentious labor talks in 2022 and 2023 threatened work disruptions.
Bragg said Tailored Brands moved back to Southern California after the labor talks concluded in the summer of 2023, avoiding the impact of a drought in Panama that has started affecting the number of containers that ocean carriers can ship via the canal.
The West Coast, which gained its prominent role in import supply chains as U.S. trade with China skyrocketed in the 1990s, has been losing its grip on seaborne trade for years.
“The question now is whether this trend continues or is finally starting to bottom out,” said Jason Miller, a professor of supply-chain management at Michigan State University.
East Coast ports have attracted importers with their proximity to fast-growing population centers and growing factory activity in the Southeast and their better access to growing overseas manufacturing hubs such as India. The widening of the Panama Canal a decade ago helped by allowing larger containerships to reach the region from Asia.
Importers have also expanded to the East Coast and Gulf Coast as part of a strategy to reduce risk in supply chains by shipping through multiple ports. Goetz Alebrand, head of ocean freight at DHL Global Forwarding Americas, said that strategy now is making it easier for shippers to divert cargo because of disruptions.
“Cargo is a little bit like water,” Alebrand said. “It will always follow the path of least resistance.”
Twenty years ago, the ports of Los Angeles and Long Beach handled 50% of U.S. containerized imports. That share fell to 40% by 2019 and plunged to 33% last year, said Gene Seroka, executive director of the Port of Los Angeles.
Now, he said, the ports are back to 36% of market share and “are going to be as aggressive as ever” in chasing more.
East Coast and Gulf Coast ports face further challenges this year.
Importers are concerned about labor disruptions across the region as the ports now take their turn on contract talks. The leader of the union that represents dockworkers has threatened a strike if his union fails to reach agreement with employers on a new multiyear contract before the current agreement expires at the end of September.