Pacific Maritime Association

28 T H E Y E A R I N R E V I E W 28 2 0 1 3 A N N U A L R E P O R T T H E Y E A R I N R E V I E W In The Fight For Market Share, Reliability Is Essential For West Coast Ports 28 2 0 1 3 A N N U A L R E P O R T For years, West Coast ports were the gateway of choice for goods sent to and from Asia. Indeed, cargo volumes rose rapidly for more than two decades, as con- tainerized imports fueled huge gains. Yet the recent picture has been more mixed. Since 2008, with the exception of a spike in 2010, West Coast containerized cargo volumes have been essentially flat. At the same time, the West Coast's national share of container traffic has declined. These last five years pose a warning sign to West Coast ports: Without further innovation, the once-thriving waterfront is at risk – and, with it, the livelihood of workers in port communities and beyond. Where is the Cargo Going? During the past five years, while containerized cargo volumes in North America have risen slightly, the West Coast share has dropped. Consider imports, which drove West Coast growth for two decades: In 2008, the West Coast share was 48.6 percent. By 2013, it had fallen to 43.5 percent, according to a review of U.S. trade data. These figures, shown in the chart to the right, tell a simple story: East Coast and Gulf Coast ports are gaining volume at the West Coast's expense. Since the recession, the West Coast has recovered nearly to peak levels; at the same time, however, East Coast and Gulf Coast ports have gained considerable volume. This trend could worsen as competition for discretionary cargo intensifies with the 2015 opening of the wider Panama Canal, as well as larger and increasingly sophisticated ports in Canada and Mexico, and diversification of global sourcing. Whereas the West Coast is typically the most efficient route for goods sent from China, manufac- turing centers in other parts of Asia are efficiently accessing East Coast ports via the Suez Canal. What is Causing the Diversion? The West Coast began to see diversion of discretionary cargo after the 10-day coast-wide port shutdown in 2002, and reliability concerns have con- tinued to influence shippers' decisions ever since. Extended and contentious contract negotiations between the Office Clerical Unit and the Harbor Employers Association in 2012 further eroded confidence in Southern California ports, and other recent regional skirmishes along the West Coast have raised questions about the ports' reliability – causing shippers to reconsider shipping patterns. Investment in deep-water terminals to handle 10,000-TEU and larger mega-vessels has also accelerated throughout North America. While the West Coast has largely invested to meet the needs 1997 2005 2001 2009 1999 2007 2003 2011 1998 2006 2002 2010 2000 2008 2004 2012 2013 40% Share of U.S. Containerized Cargo – Imports In recent years, East Coast and Gulf Ports have gained market share at the expense of the West Coast. SOURCE: USA Trade Online/Martin & Associates 60% 55% 50% 45% East Coast/Gulf Ports West Coast Ports

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