USWC Market Share Losses Are Pretty Much Across the Board

By Jock O’Connell

Okay, let’s get the good news out of the way first. Last year, U.S. West Coast (USWC) ports held higher shares than they had in pre-recession 2006 of U.S. containerized imports from the Far East in four categories of goods – ink-jet printers, athletic footwear, TV receivers, and vacuum cleaners.

That’s it. None of these four categories loom especially large – at least weight-wise – in the whole scheme of transpacific trade. The largest category, the printers, ranked as the 26th largest containerized import (by declared weight) handled at U.S. ports in 2016. The sneakers were 29th, followed by the TVs at 45th and the vacuum cleaners at 83rd. (I could have scrolled further down the list of imported goods, but there didn’t seem much point in searching for another pony.)

As our friend Bill Mongelluzzo over at the Journal of Commerce has long been remorselessly chronicling, the story of the West Coast ports over the past decade or so has been one of relentlessly diminishing shares of the transpacific import trade. Where America’s Pacific Coast ports earlier in this century once handled three-quarters of containerized shipments from the Far East, the share now hovers around the 60% mark.

And with the opening of the expanded set of locks at Panama, the diversion of TEUs from West to East and Gulf Coast ports in the past 12 months seems to be accelerating as shipping lines have been sending larger vessels through the canal faster than anticipated by most analysts.

The danger, as PMSA vice president Thomas Jelenić opined in last month’s edition of this newsletter, is that a downward spiral in market share could eventuate in an outright drop in container volumes moving through USWC ports.

Not surprisingly, evidence of the diminishing importance of West Coast ports to the national economy is causing restlessness among maritime industry leaders up and down the coast, even if public officials up and down the coast tend to be exasperatingly indifferent to such mundane matters.

In some import categories, the fall-off in USWC trade shares can be attributed to factors over which port authorities have little or no control. For example, the massive investments American and foreign automakers have made in assembly plants in the Southeast helps explain why shipments of automotive parts and accessories from East Asia to USWC ports have dropped from 85.3% of the U.S. mainland total in 2006 to 64.7% ten years later. Similarly, containerized imports of new tires from East Asia via USWC ports have fallen, with a 79.3% share of containerized imports from East Asia shrinking to 62.0% last year, while Charleston and Savannah saw substantial growth in their Asian tire imports.

What a closer examination of U.S. trade data reveal, though, is that the fall in USWC share of containerized imports from East Asia is much broader than generally feared. In fact, in not one of the 10 leading categories of containerized imports (at the four-digit HS Code level) did USWC ports NOT see a decline in market share. That much is evident in Exhibit 4 on the previous page.

The chart is admittedly congested. But take my word for it. These merchandise categories were – by declared weight – the Top 10 containerized imports into U.S. ports last year. Together, they accounted for slightly less than one-fourth of all containerized imports last year.

In several instances, there were absolute declines in containerized import loads. Among the top 50 containerized imports from the Far East (again, by declared weight), 8 categories of goods at the 4-digit HS code level of classification saw absolute drops in containerized tonnage between 2006 and 2016 nationally. For USWC ports, there were 21 such categories.

USWC ports have also seen their shares of the declared value of containerized shipments from the Far East drop from 78.7% in 2006 to 68.6% last year.

Still, the news from the data mines is not entirely bad for USWC ports. It’s long been supposed that the ability to speed Asian goods to markets through North America is the major advantage of USWC ports. That may not be a critical factor for importers of low-cost goods (or the spices peculiar to Cajun cuisine). But it is typically a foremost consideration for shippers of pricier merchandise that yearns to be consumed as quickly as possible.

The latest data suggest that the USWC ports have maintained this unique marketing advantage. Even though their overall share of the transpacific containerized import trade has been dwindling for over a decade, the five big California and Washington State ports continue to handle containerized goods that are – pound for pound – significantly more valuable than containerized goods entering the U.S. via East and Gulf Coast ports.

In pre-recession 2006, according to U.S. Commerce Department statistics, the average value per pound of containerized imports from East Asia through the neighboring Ports of Los Angeles and Long Beach exceeded the average value at the nation’s second largest port complex, New York/New Jersey, by 33.9%. By 2016, that differential had grown to 35.0%. Similarly, the San Pedro Bay ports last year also enjoyed favorable value-to-weight ratio advantages ranging from 17.1% (Norfolk) to 115.0% (Houston), with Charleston (44.7%) and Savannah (32.4%) in the middle.

What may surprise many is that the Ports of Los Angeles and Long Beach are not at the very top of the dollar-per-pound ranking. That distinction instead belongs to the Port of Tacoma, which has consistently led the category over the past decade. In 2006, Tacoma’s containerized imports were – by average pound – 18.8% more valuable than even the higher-than-average value imports crossing the docks at the Southern California ports.

So for those shippers of high-value or time-sensitive merchandise, Tacoma – along with other U.S. West Coast ports – continue to offer a decided advantage for importers with a need for speed.

The commentary, views, and opinions expressed by Jock O’Connell are his own and do not reflect the views or positions of the Pacific Merchant Shipping Association. PMSA does not endorse, support, or make any representations regarding the content provided by any third party commentator.