Record Long Beach Port Traffic Shows Strength in U.S. Demand

By James Nash and Matthew Winkler

(Bloomberg) — Electronics, auto elements and garments from Asia are streaming by way of the second-busiest U.S. port at report ranges, signaling retailers’ confidence within the economic system and shoppers’ eagerness to purchase.

The Port of Long Beach– which is poised to overhaul neighboring Los Angeles subsequent 12 months to turn out to be the No. 1 transport gateway within the nation — had a report month in July, with cargo quantity up 18 p.c from July 2014. Figures being launched later this month will present unprecedented site visitors once more in August, and early indicators in September are “very very encouraging,” Jon Slangerup, the Long Beach port’s chief govt officer, stated in an interview at Bloomberg’s places of work in New York final week.

Overall, the 2 ports are dealing with 4 p.c extra cargo this 12 months than final, Slangerup stated. With shoppers displaying no letup, he predicted a report 12 months for Long Beach in 2015, taking out pre-recession highs set in 2007. West Coast ports are poised to regain share misplaced earlier within the 12 months, when backlogs led shoppers to divert cargo to East Coast locations like Savannah, Georgia, he stated.

“When you look at the macros, you look at unemployment, consumer confidence, savings, available discretionary spending, all of those numbers suggest that we have more to spend,” Slangerup stated. “The economy here is super strong relative to the rest of the world, and the strongest I’ve seen it in a very long time.”

Traffic on the Port of Los Angeles has been much less spectacular; after the second-best month ever in March, quantity was down in three of the following 4 months. Still, the general pattern is encouraging, and orders for subsequent 12 months counsel volumes will decide up late this 12 months, stated Gene Seroka, govt director of the Port of Los Angeles.

“It’s not just a big one-time spike during the peak season,” Seroka stated.

Both ports misplaced enterprise throughout a dispute between the labor union for 20,000 dockworkers and their employers, which all however paralyzed the 29 business seaports on the West Coast for 4 months. Slangerup stated in February that labor points accounted for 80 p.c of a bottleneck that stored as many as 36 vessels idling at sea for days at a time.

In the interview final week, nevertheless, he stated he realized that labor had “very little to do” with the disruptions, that the difficulties had extra to do with organizational glitches and inefficient cargo-handling practices.

Since March, truckers, shippers and terminal operators at each Southern California ports have been assembly to raised coordinate operations and pace cargo by way of the port advanced. Union representatives have joined the conversations.

“They recognize that by being at the table in our discussions with everybody, just how critical a link they are and how they have the ability to make and break it,” Slangerup stated. “They get it. They lost a lot of hours.”

The Federal Maritime Commission granted Los Angeles and Long Beach permission on Feb. 26 to work collectively by taking measures resembling making a pool of truck chassis to haul cargo containers. The logjam largely disappeared by May.

Retailers resembling Wal-Mart Stores Inc. and Home Depot Inc. have expressed confidence within the Port of Long Beach, whereas sustaining a four-corner technique that features cargo by way of different gateways, Slangerup stated. Port officers have met with greater than 300 clients, a few of whom spent thousands and thousands of {dollars} day by day on alternate routes.

“Nobody is going to spend 30 percent more just because they don’t like the system,” Slangerup stated.

The adjoining ports on San Pedro Bay deal with virtually a 3rd of all cargo getting into and leaving the U.S. They moved $470 billion in items final 12 months, greater than double that of the Port of New York and New Jersey.

The West Coast ports rely closely on commerce with China, the place financial progress has been slowing and the federal government unexpectedly devalued the yuan in August, rattling international markets. China accounted for 49 p.c of the worth of cargo transferring by way of Los Angeles final 12 months, and 48 p.c of the tonnage in Long Beach, in response to knowledge from each ports.

Imports from Asia to North America, aided by report automotive gross sales, elevated greater than 10 p.c in June from a 12 months earlier, in response to Bloomberg knowledge.

“These are some of the largest numbers in our history, far exceeding the pre-recession numbers,” Slangerup stated.

Overall, the local weather for international transport is bettering, in response to an evaluation by Bloomberg Intelligence. About 78 p.c of the Bloomberg Intelligence international marine transport peer group is anticipated to generate constructive earnings per share this 12 months and 83 p.c subsequent 12 months, up from 65 p.c in 2014, in response to analysis by analysts Lee Klaskow and Talon Custer.

The dispute price Los Angeles about 400,000 items of cargo, equal to greater than two weeks of quantity, Seroka stated. “A lot of the numbers post-agreement look pretty good, but we lost a heck of a lot of business.”

To hold their lead and regain earlier losses, the Southern California ports are spending a mixed $5.8 billion to broaden capability, changing a bridge and dredging harbors to accommodate the most important vessels, and automating unloading, warehousing and different exercise.

The tasks might keep the West Coast dominance in dealing with ever-larger container ships from Asia, as rivals in New York-New Jersey; Norfolk, Virginia, and Savannah additionally enhance capability and add automated options to hurry cargo motion.

Early subsequent 12 months, some giant ships which have docked in Southern California could have extra choices when new locks and a deeper channel within the Panama Canal permit them to achieve the East Coast and Gulf Coast. Slangerup downplayed the risk, saying that drought attributable to local weather change could make it more durable to fill the locks.

“They may not be able to operate at certain times of the year,” Slangerup stated.

To accommodate the most recent technology of bigger ships, East Coast ports must dredge their harbors after main storms year-round, Slangerup stated.

“They can dredge all they want, but they’re fighting Mother Nature because every time a storm comes in, they have to dredge again,” he stated.

Los Angeles and Long Beach produce other built-in benefits, together with an inland rail infrastructure, that restrict any migration of cargo, stated Chas Deller, chief govt of 10XOCEANSOLUTIONS Inc., a maritime consulting firm within the San Francisco Bay Area.

“Los Angeles and Long Beach will always be the No. 1 choice,” Deller stated.

–With help from Shin Pei in New York.