LA-LB ports warn Asia volume plunge could deepen

Date: Thursday, February 27, 2020
Source: Journal of Commerce

Port and terminal interests in Los Angeles and Long Beach say the plunge in cargo volumes in February could get even worse in the coming months if the coronavirus disease 2019 (COVID-19) worsens and spreads further in Asia.

“This is a serious issue,” a terminal operator who requested anonymity told JOC.com. He said conversations with ocean carriers in recent days about what to expect regarding the virus indicated a widespread feeling of “gloom and doom.”

The two ports officially are forecasting a 12 to 15 percent decline in container volume in the first quarter as carriers continue to cancel sailings in the trans-Pacific trades due to the spread of the coronavirus in China and South Korea.

Gene Seroka, executive director of the Port of Los Angeles, projected volumes will be down 25 percent in February, and 15 percent in the first quarter. He anticipates about 40 blank sailings in the trans-Pacific through March. Long Beach is projecting volumes will be down 6 percent in February and 12 percent in the quarter, said Noel Hacegaba, deputy executive director and chief operating officer. China and South Korea are two of the ports’ largest trading partners. 

Terminal operators in the largest US port complex are also expressing concern about a buildup of empty containers. With about 1.8 billion square feet of distribution and industrial space throughout Southern California, warehouses have been drawing down their inventories the past month and returning the empty containers to the ports, but with dozens of blank sailings, there is not enough vessel capacity to ship all of the empties back to Asia. 

“We’re starting to get a backlog of empty containers,” said Daniel Bergman, vice president of Long Beach operations at Total Terminals International. So far, carriers have not announced any calls by sweeper ships dedicated to returning the empties to Asia.

It is common for empties to back up at US ports when carriers cancel sailings due to weak eastbound demand, such as following the Lunar New Year. However, in past years the blank sailings lasted for only two or three weeks before the resumption of regularly scheduled weekly services. This year, it is uncertain when regular weekly services will resume.

Coronavirus sparks at least 20 additional blank sailings

Carriers in January announced 60 blank sailings through February to all of North America due to Lunar New Year factory shutdowns. Since then they have announced more than 20 additional blank sailings into April due to the coronavirus.

Ed DeNike, president of SSA Containers, said SSA Marine’s terminals in Seattle and Long Beach have been hit hard by the drop in volumes, but its Oakland International Container Terminal not as much. He echoed the view of other terminal operators that a backlog of empty containers is building in Southern California.  

Terminal operators are awaiting the mini-spike in imports that normally follows the return of factories in Asia to full production after the Lunar New Year celebrations, but Sean Pierce, president and CEO of Fenix Marine Services, said it’s still too early to know when that spike will occur given the vagaries linked to the coronavirus.

Even if factories in China are fully operational this spring, it is uncertain how strong the US economy will be. “There has to be demand pulling the cargo in,” Pierce said. When the year began, economists were predicting GDP growth of about 2.1 percent this year, due mostly to a stronger second half of the year, but that was before the impact of the coronavirus was understood.

On a positive note, terminal operators said the flagging container volumes have translated to a near absence of congestion at the 12 container terminals in Los Angeles-Long Beach. 

“We’ve been pretty fluid,” Pierce said. Indeed, the Harbor Trucking Association reported that the average turn time in January throughout the harbor was a near-record low of 63 minutes, down from 67 minutes in December and 98 minutes in January 2019.

 

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