While US west coast ports including Long Beach and Oakland are feeling the impact from Covid-19 and the trade war, they are still capitalising on market opportunities
Port of Long Beach is expecting to see a Q1 loss of around 7% due to the coronavirus and US/China trade war.
But since the start of this year, the impact of the trade war plus the coronavirus pandemic has had a negative impact on volumes. January year-on-year container volumes dropped by 4.8% and February volumes slumped by 9.8% as the coronavirus impact started to take effect. For Q1, the port forecasts a loss of 6-7%.
Port of Long Beach executive director Mario Cordero tells Container Shipping & Trade “It has been challenging because of the trade war that caused significant disruption in the supply chain. Add to that the Covid-19 crisis and we went from uncertainty to significant disruption to a point of chaos in the supply chain. It [Covid-19] has been a crisis of historic proportions, it is a global challenge.”
He says the San Pedro Bay complex, which includes both the Port of Long Beach and Port of Los Angeles, had a combined total of 60 blank sailings due to the Covid-19 crisis.
“Usually our January and February numbers are low because of the Chinese New Year, but because of Covid-19, the low numbers and low volumes have doubled. Ordinarily, in the Lunar New Year period, we expect a 5% reduction in volumes but because of Covid-19, the numbers have doubled to 10%. The Lunar New Year closure of factories in China averages two weeks but some of these factories were down three or four weeks due to Covid-19, so this resulted in a total stoppage in the supply chain. But China has now revamped and so we are looking forward to seeing how we come back in terms of some of these import volumes.”
Covid-19 and blank sailings
He points out the “severe impact” of blank sailings: when a vessel does not arrive in a string that loss is around US$300,000 a vessel, but if you multiply that by 10, that is US$3M.
Mr Cordero stresses “The port is open, the cargo is moving and we continue with our plan of action in making sure we emphasise efficiency and reliability in cargo movement at the Port of Long Beach, and will continue with our capital improvement projects – there has been no step back from that plan of action.”
Phase one of the US/China trade war deal was completed on 15 December 2019. Mr Cordero comments “That gave some light at the end of the tunnel, particularly for exports, we were looking forward to some volume increases and an increase of exports as we entered 2020 but the Covid-19 crisis stopped that.” But he points out that while the port had an overall loss of 9.8% in volumes, export volumes increased 19% in February. “I think if there is a positive in what we have seen, the exports have increased, but we are taking a month-by-month analysis as to how it goes with the trade war,” says Mr Cordero.
“We all have to keep in mind that even though the phase 1 agreement is a positive step, there is still approximately US$370Bn of Chinese products still impacted by tariffs, so there is a long way to go before we can measure success by trade war developments.”
The port has seen an increase in its volumes to southeast Asian countries including Vietnam, partly as a by-product of the trade war.
“Before the trade war we were seeing incremental movement to southeast Asia, primarily because of the cost of labour in China. The added factor of the trade war added further movement,” says Mr Cordero.
The port is progressing with its capital projects, with its US$1.3Bn Desmond Bridge project expected to be completed in July. Some 15% of the nation’s import cargo comes over the bridge. Mr Cordero says “We will go from two operating lanes to three with an emergency lane. Given the heavy concentration of containerised trucks, it is going to lead to more efficient movement over the bridge and a higher draft, which will allow larger vessels in the back channel, giving us the ability to handle truck traffic and the larger vessels that call here.”
Long Beach’s state-of-the-art Middle Harbour terminal project is also progressing well. “We are using electrification technology to reduce emissions. This terminal will move 3.3M to 3.5M containers when completed at the end of 2021,” says Mr Cordero.
He is also keen to point out the environmental focus of the port. “Long Beach is a great story in terms of how we have operated here in the last 10 years. We have managed to be competitive and at same time, we have been leaders in environmental stewardship.”
Since the port started its Green Port policy in 2005 and, jointly with Port of Los Angeles, its Clean Action plan in 2006, truck PM emissions have reduced by 97%, overall PM by 88%, NOx by 59% and SOx by 97%.
Elsewhere in California, Port of Oakland has also been impacted by the US/China trade war and the coronavirus outbreak – but is still seeing market opportunities and progressing with its infrastructure investments.
In calendar year 2019, Oakland TEU volumes for full/loaded containers continued to grow. Full containers grew by 2.3% and reached 1.9M TEU. This was driven by strong export performance caused by growth in recycled paper exports as shippers found new markets in southeast Asia and continued strong export demand for food products such as meat and fruit, especially refrigerated products. The port continues to see export demand growing for these commodities.
Port of Oakland maritime director John Driscoll tells Container Shipping & Trade “Coronavirus and the US/China trade war has certainly affected trade. Both events have lowered imports into Oakland. However, Oakland’s exports to markets other than China, particularly Japan and South Korea, remain strong. Despite public health initiatives to contain the spread of coronavirus, the Port of Oakland remains open for business and our operations are normal.”
Oakland – growing import volumes
He adds “Oakland’s import volumes continue to grow relative to past years because of our strong local economy in the San Francisco Bay area. Overall imports from Asia to the US have moderated somewhat due to the novel coronavirus closing Asian factories. We think Oakland’s exports will continue to grow in 2020, especially as agricultural production remains strong. We are cautiously optimistic that import volumes will hold steady in 2020. However job losses in the US are mounting and the economy is starting to show signs of weakness. An economic downturn would certainly lead to lower import volumes.”
Like other ports on the transpacific, Port of Oakland has seen some trade move to southeast Asia due to the trade war. Mr Driscoll says “Oakland has seen some trade move from China to southeast Asia. This has been driven by recycled paper exporters finding new markets in southeast Asia. Factories elsewhere in Asia are filling US import demand that used to be served by China. We expect exports to Asian countries other than China to continue growing.”
Oakland’s investments in infrastructure are making progress. In 2018, its new refrigerated cargo facility Cool Port opened for business and it has seen steadily increasing volumes. A new warehouse and distribution facility is currently under construction. “Our marine terminal tenants are making continued investments in their facilities, particularly in buying new container cranes and raising their existing cranes,” says Mr Driscoll.
Snapshot CV: Mario Cordero (Port of Long Beach)
Mario Cordero has been executive director of the Port of Long Beach since 2017. In 2003, Mr Cordero served as a member, vice president and president of the Long Beach Board of Harbour Commissioners for eight years, before resigning to accept President Barack Obama’s appointment to the Federal Maritime Commission (FMC) in 2011. He was FMC chairman from April 2013 to January 2017. Mr Cordero was named vice chairman of the board for the American Association of Port Authorities in October 2018. He has practiced law for more than 30 years, specialising in workers’ compensation cases.