Outbound Empties: What’s Being Left Behind?

By Jock O’Connell

There’s been much hueing and crying in the media and political circles over the millions of empty containers that have been shipped from U.S. ports since the onset of the plague in early 2020. Some purported maritim trade analysts have gone so far as to calculate the exact

value of the cargos that might have sailed had shipping lines not allegedly prioritized the return of empties to overseas factories. Agricultural shippers, in particular, have made hay with well-publicized allegations that their commodities have been denied passage on outbound vessels. Their complaints, having gained the ear of elected officials, contributed in no small way to the enactment of the Ocean Shipping Reform Act of 2022.

It’s impossible to argue with the numbers. Statistics clearly show a startling increase in the number of outbound empties in recent years. Through the first three quarters of this year, for example, the Port of Los Angeles has sent 2,950,562 empty TEUs abroad, 224.0% more than the 910,729 TEUs of loaded containers that sailed from the port. Next door at the Port of Long Beach, the disparity between outbound loads and empties is only mildly less pronounced, with the port’s 2,606,309 outbound empties YTD topping its 1,054,352 outbound loads by 147.2%.

Mind you, the imbalance in outbound container trade is not unique to the two Southern California ports. At the Ports of Seattle and Tacoma, outbound empties this year have exceeded outbound loads 604,815 TEUs to 417,495 TEUs. Back East, at the Port of New York/ New Jersey, outbound empties through September of this year totaled 2,608,157 TEUs, 167.8% higher than the 973,768 laden outbound TEUs the port sent abroad. Charleston’s 543,172 empty outbound TEUs easily exceeded its 482,890 loaded outbound TEUs. And Savannah’s 1,203,503 outbound empties so far this year have outnumbered, albeit marginally, the port’s 1,016,253 outbound loaded TEUs. On the other hand, the Ports of Houston, Oakland, and Virginia have each handled more outbound loads than empties through the first three quarters of this year.

But it’s been the immense volume of unfilled containers leaving the sprawling maritime complex in San Pedro Bay that has attracted most of the public’s attention and criticism, even if the complaints seem to divvy up evenly between those claiming that shipping lines have been absconding with too many empties and those\ decrying that too many empties were piling up in communities adjacent to ports.

Those alarmed by the pandemic-era widening in the gap between outbound loads and empties might want to consider that such imbalances are nothing new at the San Pedro Bay ports. In fact, the number of outbound loads as reported by the two ports actually peaked not on the eve of the pandemic but as far back as 2013 when the two ports shipped 3,625,993 loaded TEUs. Traffic in outbound loads has been downhill ever since. Last year, outbound loads totaled 2,622,061 TEUs, a decline of 27.7% from that 2013 peak. By contrast, traffic in outbound empties has moved in the opposite direction from a pre-pandemic high of 3,335,356 TEUs in 2018 to 7,163,789 TEUs last year, a 147.8% jump. So what’s going on?

As economists are accustomed to saying, it’s somewhat more complicated than most people seem to think. For one thing, the diverging lines representing outbound loads and outbound empties at the San Pedro Bay ports began widening long before the pandemic arrived to suddenly accelerate the nation’s demand for imported goods from Asia (and hence create a compelling economic rationale for recycling empty inbound containers as quickly as possible). 

Exhibit A documents the long-term disparity between inbound and outbound loads at the Port of Los Angeles and the Port of Long Beach, while Exhibit B focuses on the now highly controversial chasm between outbound loads and outbound empties. Exhibit C depicts the decline in containerized export tonnage through the two ports over the past decade. (Through September, export tonnage has been down 4.2% from the same period in 2021.) 

Given the numbers, it’s understandable that some might conclude that many of those empty boxes should be carrying U.S. exports. That’s definitely been the contention of agricultural exporters.

But what else is being left behind? 

Those who have inanely sought to put a price tag on the “lost” export trade seem to imply that billions of dollars in valuable merchandise are being denied passage. What’s generally overlooked, though, is the difference between having your exports thwarted by disruptions in seaborne container traffic and seeing your exports drop as a result of a fall-off in market demand abroad or seeing problems such as congestion drive export shipments to other ports.

Comparing containerized exports in this year’s first three quarters with the same period in 2019 reveals that overall containerized export tonnage through the San Pedro Bay ports fell by 19.0% or 3,937,916 metric tons. But let’s see which commodities have sustained the steepest declines in containerized export tonnage through Los Angeles and Long Beach between the first nine months of pre-pandemic 2019 and the same months this year.

Here are five commodities whose combined 2,114,325 metric ton decline in export tonnage account for 53.7% of the drop in containerized export tonnage through LA and Long Beach between the first nine months of 2019 and the same months this year.

Overwhelmingly, it’s shipments of Waste and Scrap Paper (Harmonized System Classification Code 4707) that’s seen the deepest drop in tonnage. The 28.2% fall-off in containerized shipments of Waste and Scrap Paper amounted to a loss of 1,022,528 metric tons or 26.0% of the two ports’ combined fall-off in containerized cargo between this year and 2019.

Waste and Scrap Paper has long been the leading containerized commodity exported from the Ports of Long Beach and Los Angeles. The trade saw its peak in 2018 when the two ports handled 5.40 million metric tons of Waste and Scrap Paper. That represented 17.7% of all containerized export tonnage through the neighboring ports that year. (By comparison, containerized exports of tree nuts accounted for just 1.2% of the ports’ containerized export tonnage that year.) What happened? The story here has largely been that of the abrupt collapse of U.S. exports of Waste & Scrap Paper to China in the fall of 2020. That September, China accounted for 52.7% of all U.S. containerized exports of Waste & Scrap Paper. But then that share slipped to 37.2% the next month before plunging to 3.4% in November 2020. It has not risen above 3.6% in any month since then. Through the first nine months of 2019, China’s share of the trade was 38.9%. This year, China’s share is just 2.7%.

This is also a case where the export tonnage fell but also shifted to other countries. China effectively left the market, but India, Vietnam, Thailand, and Malaysia all saw their imports of America’s scrap paper rise. Still, the 2,024,770 metric tons by which these four countries grew their imports of U.S. scrap paper hardly compensated for the 4,068,936 metric tons by which shipments to China shriveled since the first three quarters of 2019. In the process, the distinct geographic advantage the Southern California ports once enjoyed in exporting waste and scrap paper when China was the dominant importer has been dented by the shift in overseas markets to Southeast Asia and the Indian Ocean.

After Waste & Scrap Paper, the next biggest decline in containerized export tonnage through the San Pedro Bay ports has involved Polymers of Ethylene (HS 3901). Some 318,634 fewer metric tons of containerized polymers left the ports in the first nine months of this year than in the same period in 2019. But that drop was more than made up for nationally by a 383,281 metric ton increase in containerized polymer exports through the Port of Houston and a 370,344 metric ton bump at the Port of Charleston, not to mention the 189,917 metric ton gain at the Port of Savannah. So the dwindling of exports through LA and Long Beach had little to do with declining overseas demand for American polymers. The business of handling those exports simply went elsewhere.

The third biggest downturn in the LA-Long Beach containerized export trade involved Ferrous Waste & Scrap (HS 7204). The two ports have seen their exports of this commodity slide by 19.9% as the two ports shipped 281,543 fewer metric tons than in the first three quarters of 2019. Nationally, exports of Ferrous Scrap have declined by 17.0% or 636,132 metric tons over the same period. Apart from increased volumes moving through the Ports of Savannah and Virginia, the nation’s largest ports all saw declines. Interestingly, the San Pedro Bay ports did not sustain the most pronounced drop in exports. That title went to the Port of New York/New Jersey, where containerized export tonnage of Ferrous Waste & Scrap dropped by 289,792 metric tons between the first three quarters of 2019 and this year’s first three quarters. 

Further attesting to the reality that containerized exporting is not a particularly glamorous enterprise, the fourth biggest decline in export tonnage from LA and Long Beach was a commodity labeled “Residues of Starch Manufacturing, etc.” or HS 2303. Nationally, containerized exports of HS 2303 have fallen by 18.1% or 614,916 metric tons from the first three quarters of 2019. Over the period, export tonnage at the two Southern California ports has been down by 269,822 metric tons or 16.7%. But that was nothing compared to the 71.8% (-299,728 metric tons) fall-off at the Northwest Seaport Alliance Ports of Tacoma and Seattle.

Rounding out the list of the five biggest negatives in the San Pedro Bay ports’ containerized export trade are Soybeans (HS Code 1208), 221,798 fewer tons of which have been exported so far this year than in the first nine months of 2019, a decline of 13.2%. Shipping soybeans in containers is a specialized trade with a much higher value per kilo than the 90 percent of the nation’s soybean exports that are transported by bulk carriers. Nationally, exports of containerized soybeans have slipped by 2.5% since the first three quarters of 2019. What’s remarkable here is that the two Southern California ports had commanded a 55.2% of America’s contained soybean export trade in 2019, but saw that share drop to 38.9% last year before recovering to a 45.5% share so far this year with a massive surge of imports to China.

So what’s to blame for all those outbound empties?

That the Ports of Long Beach and Los Angeles, along with the great majority of other U.S. ports, do not ship nearly as many loaded containers as arrive from abroad is nothing more than a tangible manifestation of the fact that Lyndon Johnson was President when the United States last consistently ran merchandise trade surpluses. (Last year’s merchandise trade deficit amounted to $845.05 billion.)

Fundamentally, a nation’s trade deficit is a macroeconomic phenomenon related to the role of the dollar in global finance and to Americans’ propensity to spend more than we earn. Alas, that has never deterred political and business leaders from offering up a variety of narrow microeconomic bromides, like export promotion programs, that generate a buzz of high-profile meetings with cabinet secretaries, industry working groups, and press conferences but normally fail to achieve any truly measurable gains.

While it’s understandable that some might see all those empty outbound containers as lost export opportunities, neither tonnage nor TEU numbers tell us much about economic value. Scrap paper may fill a lot of boxes, but it’s still not an especially valuable commodity. The five commodity groups identified above accounted for 42.7% of all containerized export tonnage through LA and Long Beach in 2019 and 40.2% this year. But their shares of the dollar value of the ports’ containerized exports were much more modest, 6.5% in 2019 and 7.4% this year.

Recalling that no more than twenty percent of America’s exports travel abroad in oceanborne containers, it would be churlish of me to think that there are those in the maritime industry currently proposing a national export strategy who might instead like to see exporters simply cram more cheap stuff into more boxes.

Happy Thanksgiving to all.

Disclaimer: The views expressed in Jock’s commentaries are his own and may not reflect the positions of the Pacific Merchant Shipping Association.