Cargo Trends: US West Coast seeks to remedy loss of market share

LONG BEACH, October 4 – BNSF Railway plans to invest more than $1.5 billion for the construction of a major new rail facility in Southern California, a move ostensibly aimed at easing congestion at the Ports of Long Beach and Los Angeles.

“This project will help improve supply chain fluidity, reduce environmental impacts and enhance the competitiveness of California and the nation’s largest port complex,” said Mario Cordero, Port of Long Beach Executive Director.

In the new Barstow International Gateway Project, BNSF plans to offload containers from ships at the Ports of Los Angeles and Long Beach onto trains for transport through the Alameda Corridor up to the planned facility in Barstow, California. 

There, containers will be processed and built into trains moving eastward along BNSF’s network across the nation. 

BNSF said westbound freight would be similarly processed at the facility to more efficiently bring trains to the San Pedro Bay ports and other California terminals.

USWC market share falling

The BNSF plan comes as US West Coast ports – and their associated rail networks – are losing market share to their competitors on the East and Gulf Coasts, especially the Port of New York-New Jersey, as shippers opt for the all-water routes to markets there.

PNYNJ saw 843,191 teu during the month of August, putting it just ahead of Long Beach at 806,940 teu and Los Angeles at 805,315 teu. For PNYNJ itself, the August total represented a 7.99% increase year-over-year.

PNYNJ Director Bethann Rooney told a news conference that “70% of this year’s growth is West Coast cargo that has shifted to New York and New Jersey.”

The PNYNJ increase is in line with stepped-up growth at other East Coast ports which, collectively, saw an uptick of 9.78% in containerized throughput year-over-year in August. 

The largest percentile surge in throughput growth came at the Port of Savannah, which saw an 18.50% jump, rising to 575,513 teu this August from 485,595 teu in August 2021. 

The Port of Virginia, located in Norfolk, also saw a sharp rise in throughput, jumping 10.71% from 307,923 teu in August 2021 to 340,926 this August. 

Although South Carolina’s Port of Charleston saw a drop of 4.80% year on year in August, its year-to-date figures are still a robust 3.39% ahead of the same period in 2021.

USEC ports gaining volume

Indeed, when it comes to year-to-date figures, the four leading East Coast ports have seen a collective increase in throughput of 8.77% — a marked contrast to the 2.20% decline at the four leading West Coast facilities. 

That means a shift in market share among the Top Ten* US ports, according to Cargomatic calculations. Year-over-year, the US West coast leaders have dropped in market share by 2.90%, while the East Coast has gained 2.06%. 

The remaining share of .83% has been picked up by the Port of Houston, which saw throughput of 382,842 teu in August, up 19.45% year-over-year, with its year-to-date change an impressive uptick of 17%.

Concerns about labor and railroads

The shift in market share to the East Coast from the West is largely attributed to shipper concerns over labor negotiations and inadequate rail facilities.

“Alternate routes away from the US West Coast are pivotal, as the labor contract situations extend well beyond the Ports of Los Angeles and Long Beach,” said Peter Hsieh, vice president of sales and marketing for OEC Group.

“More product from East Asia comes through the West Coast than anywhere else in the US,” he said. “Avoiding these ports means clients will have their goods in time for the busiest shopping seasons.”

Uncertainty over the region’s freight railroads was another reason for by-passing the US West Coast ports this season, as reported by the Journal of Commerce. 

Shippers worried about ‘metering’

In July, the trade publication said that BNSF and Union Pacific Railroad were “metering” the number of ocean containers they hauled from the ports of Los Angeles and Long Beach.

“The two railroads are keeping containers sitting in Southern California to prevent a repeat of last summer when intermodal service to Chicago was suspended for one week and stringent metering was necessary to prevent the collapse of the international intermodal network,” JOC reported. 

Cargo owners in Dallas, Chicago, and Memphis said they were waiting “for weeks” in some cases for trains to arrive from Southern California. One said containers bound for Memphis were stuck for six weeks in Southern California.

It is too soon to tell if the shift in cargo volumes away from the West Coast to the East and Gulf Coasts is the new normal or a temporary change while shippers await the outcome of the current round of negotiations between the West Coast dockworkers and their employers.

But BNSF is not waiting for that to happen. Instead, it is betting on a longer-term strategy aimed at improving throughput to and from the San Pedro Bay ports and, in the process, maintaining or increasing its part of the region’s market share. 

*Cargo Trends is a weekly survey of the nation’s Top Ten container ports by throughput volume. The ranking for August is: (1) New York-New Jersey, (2) Long Beach, (3) Los Angeles, (4) Savannah, (5) Houston, (6) Virginia, (7/8) Seattle-Tacoma, (9) Charleston and (10) Oakland.

PHOTO: Courtesy of BNSF Railway