Containerized Exports: Nothing to See Here?
Jock O’Connell
The maritime industry’s more celebrated box counter can’t, it seems, be bothered to pay much heed to exports The containerized trade statistics most commonly cite in the nation’s media are arguably those contained in the monthly Global Port Tracker published by the National Retail Federation (NRF) in collaboration wit Hackett Associates. Admittedly, it’s not the fault of the NRF that these reports only cover imports. The NRF, after all, has no compelling reason to commission the routine collection of data on America’s maritime export trade. Still, the Global Port Tracker numbers are dutifull reported by the media, notably by the venerable Journal of Commerce and the even more venerable Wall Street Journal. By contrast, were it not for the occasional airing of grievances by organizations like the Agriculture Transportation Coalition, the general public and their elected representatives might not have heard much
about America’s containerized export trade. The more uncharitable among them might even come to believe that outbound loads are little more than ballast about which the less said the better.
Yet, that’s not an entirely unfair conclusion. Apart from agricultural produce, the mainstay of America’s containerized export trade has long been our detritus or, more benignly, recyclables in the form of scrap paper, metal, plastics, and used clothing. Not exactly the kinds of things a wealthy, technologically sophisticated country likes to brag about. It’s also the case that the numbers of loaded export containers are not only overshadowed by the volume of import loads, they have also been dwarfed in recent years by the numbers of outbound empties sailing from U.S. ports. As Exhibit A amply testifies, empties have dominated outbound container traffic for several years now at America’s largest maritime gateway, the Ports of Los Angeles and Long Beach.
A History of Diminishing Container Exports But it’s not just at the two Southern California ports where the nation’s containerized export trade has lately been waning. The number of outbound loaded TEUs from the five major U.S. West Coast ports peaked a decade ago. The Port of Los Angeles topped out at 2,109,394 outbound loads in 2011, while the Ports of Long Beach and Oakland both crested in 2013 at 1,704,924 and 1,014,786, respectively. The Northwest Seaport Alliance Ports of Tacoma and Seattle began reporting their joint numbers in 2013 and saw their outbound loads peak in 2016 at 984,481 TEUs. Compared with their highest years for outbound loads, traffic last year at LA was down 43.7%, 17.0% at Long Beach, and 25.0% at Oakland. See Exhibit B.
Lest anyone think the decline in containerized exporting is merely a Left Coast phenomenon, consider Exhibit C, which charts the volume of outbound loads at the nation’s ten largest container ports over the past decade. Among all of these ports, outbound loads dropped by 13.4% between their peak in 2018 and last year.
Over on the East Coast, outbound loads at the Port of New York/New Jersey peaked, as far as the available data indicate, in 2011 at 1,621,264 TEUs. (Data on the Port Authority’s website distinguishing loaded from empty containers began that year.) Last year’s trade in outbound loads (1,299,070) was down 19.9% from the presumed peak.
The peak years for outbound loads at other major U.S. ports have been much more recent. Indeed, both the Ports of Houston and Virginia had their best years last year, while the Ports of Savannah and Charleston peaked in 2019. Presumably, the steadily larger shares of the nation’s containerized import trade that have been driven to Atlantic and Gulf Coast ports in recent years helped regional exporters by providing more empty containers to fill, more slots on departing vessels, and shipping rates that were more attractive than when the ports were much less busy.
Generally, one of the standard explanations for the overall decline in outbound loads is that our trading partners have gradually grown less indulgent about the quality of our exports of waste and scrap. China, for example, erected barriers in 2013 (“Green Fence Policy”), in 2017 (“National Sword Policy”), and in 2018 (“Blue Sky Policy”) that denied U.S. exporters the ability to, for example, ship containers filled with old pizza boxes, many still featuring bits of mozzarella and pepperoni. Accordingly, China’s share of U.S. containerized exports of waste and scrap paper (HS 4707) collapsed from 74.4% in 2016 to 2.8% last year. Worldwide, our containerized waste and scrap paper export trade has fallen 28.0% in tonnage terms since peaking in 2018. Similar restrictions were imposed on plastics and ferrous waste. Further, as their own economies have developed, China and a host of emerging economies like Thailand, Indonesia, Vietnam, Malaysia, and India have become more self-sustaining in fulfilling their own demand for recyclable materials. The cumulative impact of a more finicky world is likely to drag down a major segment of our containerized export trade. According to the latest “State of Disposal and Recycling in California” report from CalRecycle, the relevant state agency: “recyclable materials accounted for 23 percent of the 58 million tons of all material exported from California” in 2020.
One thing not mentioned in the CalRecycle report, or indeed in the relatively few media references to the nation’s containerized export trade, is the cost of shipping. This may be one of those cases where warnings to update your software go ignored. Waterfront lore has long maintained that containerized export loads are little more than the dependent stepchildren of the containerized import trade. More specifically, it’s the rates
paid by those shipping enormous volumes of import loads that largely finance transoceanic sailings. Outbound loads are thus valued more as necessary ballast than as a significant revenue source.
Yet, the upside of being commercially disparaged has usually been much cheaper cargo rates. This, in turn, eventually leads to questions about the sustainability of shipping low-margin goods abroad if outbound shipping rates were to start rising. Were it not for importers effectively subsidizing the backhaul trade by paying most of the cost of roundtrip sailings, heaven knows how many American businesses would find exporting to overseas markets to be just plain unprofitable.
The effective subsidization of export shipping rates is not a hidden benefit, but it mostly goes unacknowledged by exporters. It almost never comes up when elected officials are persuaded to lament about the alleged misdeeds of ocean carriers and marine terminals. If anything, the word “entitlement” springs to mind.
The shipping rates covering the vast majority of containerized imports are defined by contracts negotiated between shippers and shipping lines. As these specifics of these contracts are considered proprietary information and are not generally disclosed, the more easily available spot rates are often used as surrogate, albeit heavily caveated, cost indicators. The U.S. Department of Agriculture’s Agricultural Marketing Service compiles monthly spot rates for containers shipped from Los Angeles/Long Beach to Shanghai. Prior to the disruptions caused by the COVID-19 pandemic, these rates were generally well under $1,000 per forty-foot container (FEU). But as Exhibit D reveals, the cost of sending a container from San Pedro Bay to Shanghai nearly doubled between March and April 2020 and remained elevated until subsiding in last year’s fourth quarter. (The latest
numbers from USDA are for this March, when the reported rate for shipping an FEU to Shanghai was $1,200.)
Normally, backhaul rates have compared very favorably with the head haul rates for container shipments between Shanghai and Southern California’s ports. However, as the pandemic spurred a surge in Asian imports flooding U.S. ports, eastbound transpacific spot rates exploded. According to Freightos, a popular platform for booking cargo shipment, FEU spot rates on the China to West Coast passage soared from under $5,000 in late 2021 to slightly over $20,000 last September. Those spot rates have since collapsed.
Drewry Supply Chain Advisors’ most recent report (April 20) lists a $1,856 per FEU rate on the Shanghai to Los Angeles route, down 79% year-over-year. By comparison, Drewry pegs the comparable spot rate for shipping an FEU from LA to Shanghai at $1,009, a difference of $847.
With outbound rates still lingering above pre-pestilent levels, it’s certainly conceivable that some portion of the recent fall-off in outbound loads can be linked to the spike in shipping rates. What could be profitably exported at $800 per FEU became unprofitable at $1,600…and may even remain unprofitable at $1,200.
When the mix of cargoes shipped in containers from West Coast ports comes principally from farmyards and junkyards, it’s difficult to see how rhetorical gestures like calls for a national export strategy would yield a significant boost in the volume of containerized exports from America’s Pacific Coast gateways, even if shipping rates were to recede.
Disclaimer: The views expressed in Jock’s commentaries are his own and may not reflect the positions of the Pacific Merchant Shipping Association.
