The explosive e-commerce demand due to the pandemic that “drove unprecedented amounts of containerized products from Asia to consumer economies of North America” will continue in 2021, according to a new report from Cushman & Wakefield.
With an expected 6.5% GPD growth in 2021, imports are projected to rise by 21% this year.
After initial pandemic-induced weakness in the first half of the year, ports in the U.S. and Canada rebounded strongly in the second half of 2020. Volumes for the full year changed only modestly—a 2% increase in loaded inbound twenty-foot equivalent units (TEUs) and a decline of 5.5% on loaded export units.
The trend toward larger vessels continues. Along with the consolidation of the major ocean lines into three powerful alliances, this translated to fewer port calls and a further concentration of volume to the largest ports.
Report highlights include:
West Coast: 2020 impacted the main West coast ports differently. Long Beach and Vancouver, for example, experienced considerable growth in import volumes, but Northwest Seaport Alliance import volumes declined. Overall, there was a 2.4% increase in loaded import container TEUs.
East and Gulf Coasts: Strong performances were delivered on import volumes at New York-New Jersey (NY/NJ) and Savannah, as well as Houston on the Gulf Coast. Overall, import growth on the Atlantic ports we track was a modest 1.3%.
Coastal split: There was no shift in 2020 of East-West port coastal shares, marking a pause in a decade-long trend that favored the Atlantic and Gulf Coasts. We expect the longer-term trend to resume in 2021.
“The story in the coming months is about COVID-19 vaccinations and a return to some kind of normalcy. This should drive demand for goods as well as services. Further out, the threat of tariffs or other trade disruptions, notably with China, still looms. Ports also face the need to restore shippers’ confidence in the aftermath of congestion and severely delayed cargo,” the report said.Cushman & Wakefield project six major developments that will impact ports in 2021 and beyond.
Goods or Services?
The question is whether consumers will revert to pre-pandemic habits. While spending on services dropped 7%, purchases of goods rose by the same amount from Q4 2019 to Q4 2020, per the St. Louis Fed. For imports, and therefore for port activity, much now depends on consumer behavior. Typically 69% of U.S. GDP is comprised of personal consumption expenditures. And of this consumer spending, 62% is typically spent on services and 38% on goods (Q4 2020). Given the $1.9 trillion recovery package, combined with a 6.5% real GDP growth forecast, the report concludes that consumers will likely consume both increased goods as well as services keeping port TEUs strong throughout all of 2021.
Sourcing Shifts
Sourcing has moved away from China toward other Asian countries as well as Mexico due to both tariffs and labor costs. Looking at Vietnam, for example, U.S. imports have grown by 27% per year in value, from 2018 to 2020, For these more southern origins, the U.S. East Coast is reached more cost-effectively via the Suez Canal route than by a transpacific route transiting the Panama Canal or using a land-bridge via a West Coast port. Thus, a continuation of this sourcing trend will further the volume shift towards Atlantic versus Pacific Coast ports.
Gateway Concentration
The country’s top four ports -- Long Beach, Vancouver, NY/NJ, Savannah and Houston -- all saw positive import volume growth in 2020, while two-thirds of the next six ports experienced lower import TEUs. While the big ports will likely get bigger, driven by liner slot costs and importer urgency, there are also potential opportunities for niche ports to rise. Lower operating costs, less congestion and ease of rail access to large inland markets can support the growth of smaller ports. A good example of this is the Port of Mobile, AL, which completed a significant berth expansion in March 2020 that allowed it for the first time to handle two vessels of more than 8,000 TEUs. This affords more schedule flexibility and certainty to carriers evaluating new service routings.
Service Issues
Severe congestion at terminals continues due to limited productivity from labor shortages, reduced trucking capacity and tight rail capacity. For example, since October 2020, the San Pedro Bay ports have had numerous container ships waiting at anchor for an open berth, a rare occurrence, which led to delays extending into several weeks. But the log jam appears to finally be breaking at present, with the number of container ships at anchor declining to 19 in mid-March. Other ports, such as Savannah and Seattle/Tacoma, have also experienced periods of delays, but less dramatic or continuous than at LA/LB. The issue is how rapidly will port congestion ease with a return to normal depending on when import volume growth moderates.
Alternative Routings
Cargo owners have found less congestion in Oakland and Seattle/Tacoma, thus serving as alternatives to Southern California. And on the East Coast, Norfolk has avoided delays. Carriers have already made some changes, such as the new CMA CGM service announced in January 2021 from Yantian, China, direct to Oakland and Seattle, promoted as a “reliable alternative” to LA/LB. Also, Wan Hai’s new independent service calls Seattle first then Oakland before returning to Taiwan and mainland China. Still, Southern California remains a massive consumer market and its twin ports are well equipped to handle the largest vessels.
Inland Ports
Eastern inland ports are enjoying greater intermodal access to ocean ports each year. The trend that the Port of Virginia launched in 1989 continues. In addition to Virginia’s trailblazing Front Royal inland terminal, North Carolina, South Carolina and Georgia have all been active on this front lately. Inland ports are now established at Charlotte, NC; Greer and Dillon, SC; and near Dalton, GA. The Appalachian Regional Port (ARP) near Dalton, GA, opened in August of 2018, exceeded its projected 2022 volumes already in 2020; and traffic is up about 70% so far in 2021 versus a year earlier. Plans are also in the early stages in Georgia for a new inland terminal in Gainesville. These intermodal yards in the Southeast handle exports as backhauls—for example, logs to Asian furniture and construction markets and wood pellets for British, European and Scandinavian electric generating stations.
