The Port of Los Angeles has been battered by its slowest May since the recession of 2009.
Year-over-year volume was down 30%, from the 828,662 twenty-foot equivalent units (TEUs) handled in May 2019 to 581,664 TEUs this year.
“Key factors included America’s shutdown economically due to COVID-19’s pandemic. There’s less consumer purchasing, less U.S. manufacturing. We also see the continuing negative impact of the trade war between the United States and China and the policies that have been in place,” said Port of LA Executive Director Gene Seroka.
“We’re also comparing the busiest month of May in our 114-year history and that was in May of last year in 2019, so the bar was set pretty high due to a strong advance of inventories during that trade debate,” he noted.
Seroka expects the negative effects from the U.S.-China trade war and the coronavirus pandemic to linger throughout the remainder of the year, and he said both have significantly damaged the supply chain.
Seroka said as an example, “the U.S.-China Phase One trade deal calls for $36.5 billion worth of agricultural exports from the United States to China in year 2020. The United States Department of Agriculture projects that by September, after three-quarters of this year, that total will only be $8 billion, so we’re lagging behind in the commitments of this Phase One China trade deal by the principals.
“And our traditional peak season is in jeopardy right now, although we see some modest demand signals. Some economists are predicting not until Q1 of 2021 will we start to see any noticeable economic bounceback with respect to consumer spending. That would mean a cargo uptick ever so slightly in the fourth quarter of 2020, but it’s a little bit early to say that with any certainty.”
Seroka said in his estimation, “we will have a permanent loss of 15% of our imports that won’t return due to the trade policies.”
But if there is a silver lining with the loss of imports, he said, “we may just have a chance to have a better balance of trade with imports and exports, which in effect could lower our cost to serve, making us a more desirable trade gateway.”
Some volume moves to Long Beach
Seroka said 2020 volumes at the Port of LA are tracking 19% lower than the first five months of 2019.
“For perspective, the San Pedro Bay ports of Long Beach and Los Angeles were down nearly 14% in the month of May and are lagging 2019 year-to-date by about 13%,” he said.
The two ports combined handled 1,209,872 TEUs in May, down 13.7% from 1,402,286 in May 2019. From Jan. 1 to May 31, the San Pedro Bay ports handled 5,901,270 TEUs, compared to 6,782,331 in the same period last year.
The Port of Long Beach, however, earlier this week reported a positive May, with volumes up 7.6% year-over-year. According to The McCown Report, Long Beach was the only major U.S. port to turn in a positive May.
Seroka alluded to the volume gain across the bay when he said, “We saw a shift of some vessel services from the Port of Los Angeles to Long Beach that amounted to about 10% of our normal business traffic.”
Volumes down across the board
Seroka said all lines of business at the Port of LA in May were in “negative territory,” with the exception of the automotive sector.
“But we only had two ships in the month of May in the automotive sector, carrying only a little more than 1,900 units, and there are no ships scheduled for the entire month of June. So that positive year-to-date number will quickly turn negative by the end of the second quarter,” Seroka said.
Autos handled between January and May totaled 46,820 units, up 4.85% compared to 44,656 last year.
“In the scrap metal market, limited demand overseas and a slowdown in manufacturing globally have hindered this segment. We had no scrap metal vessels in the month of May. Demand has plummeted since the onset of COVID-19 as manufacturers have idled plants in the steel market and the ongoing effects of the trade war have also impacted us here.”
The scrap metal volume between January and May was down 40.6% year-over-year, from 376,096 metric tons to 223,449 metric tons.
Less cargo means less work, Seroka said.
“Week-over-week, our labor shift work is down nearly 4%. Year-over-year we’re down 19% and by the all-important, three-year moving average, we’re down 30% in labor work shifts compared to what we had been running since 2017,” he said.
Canceled sailings, “the largest we’ve seen in the industry in some time,” delivered a blow to the port, Seroka said.
“Quarter 1 showed 40 canceled sailings coming to the Port of Los Angeles and by the end of Quarter 2 we’re estimating 23 ship sailings will have been canceled coming to the Port of LA. For the month of May specifically, we received and worked 60 vessels, compared to 89 ships last May,” he said.
Seroka did say it appeared container ships from Asia are beginning to return to LA.
“June canceled sailings estimates have eased somewhat compared to months recently witnessed and those in May,” he said.
Click for more FreightWaves articles by Kim Link-Wills.
