This year, California has had a number of economic setbacks, including the closure of three regional banks and excessive rains that submerged agriculture. The $2.8 trillion freight business in the state is now in danger, as reported by GCaptian.
Shifting supply routes
The pandemic caused the Los Angeles and Long Beach ports to become overwhelmed, leading to other ports like those in New York-New Jersey and Houston gaining market share. Factors such as labour talks, the relocation of factories from China, and population growth in Sunbelt states are also contributing to the shift. Some experts are concerned that the LA-Long Beach ports may not remain the top US ocean gateway in the long term. As negotiations between West Coast dockworkers and employers approach one year, logistics managers are avoiding potential strikes and lockouts by shifting supply routes away from LA’s San Pedro Bay. Businesses are prioritizing reliability after experiencing bottlenecks during the pandemic. Some recall the 2014 contract talks that lasted nine months and caused vessel backups and shortages. Some importers are diverting cargo away from the West Coast until an agreement is ratified, and retailers are working to insulate consumers from the impact. Recent disruptions at LA-Long Beach have renewed calls for government intervention.
Shiting demographics and their causes
The shifting demographics of the US, with places like Texas and Florida growing faster than California, are causing a shift in port traffic. Gulf Coast ports are seeing a 43% increase in goods, including electronics, furniture, and machinery usually imported from Asia, while West Coast container volumes are down 10% compared to 2019. The logistics system in LA and Long Beach is designed to deliver freight locally and across the country through warehouses, distribution centres, and store shelves to Chicago. Ports in Texas, Alabama, Georgia, and New York have expanded their capacity to accommodate larger ships and improve cargo flow to the Midwest and South. Take into account what the Georgia Ports Authority recently announced: the Mason Mega Rail Terminal’s launch, a five-year, $220 million investment project touted as the continent’s largest port-based intermodal complex. Delivery to locations as far away as Dallas or Chicago is guaranteed within three days, which is the typical period of time containers are typically let to sit on the docks at LA-Long Beach.
Up for Grabs
The Southern California ports have advantages such as a direct route from Asia-Pacific and a vast network of transportation options. They have twice the capacity of their closest rival, but a third of their containers are becoming more competitive. A dip in cargo volume could lead to job losses throughout the supply chain industry, which drives nearly a third of California’s economy and supports one in five jobs. Despite this, the region still has the second-highest GDP of any US city and remains a major distribution hub.
Drop in the number of workers
Data from the Pacific Maritime Association shows a 25% drop in dockworker shifts at the LA and Long Beach ports in Q1 2023 compared to Q1 2019. Southern California truckload tender volume was also down by 23% in April 2023 compared to April 2019, while national truckload levels are still increasing from pre-pandemic levels. LA’s port leaders are seeking federal funds for infrastructure projects including digitalization measures, cleaner equipment, and workforce training facilities. Once contract negotiations are over, some port customers will send their cargo back to Southern California, which is essential for the area to continue serving as a thriving supply chain centre. Although they haven’t considered it yet, shippers aren’t ruling it out, according to Anne Reinke, CEO of the Transportation Intermediaries Association.
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Source: GCaptain
