Shifting Cargoes: The Container Trade Adapts to Geopolitical Challenges

 

New York Yankees' great, Yogi Berra, once said, "You can learn a lot by watching." And those watching the marine container cargo world have observed a lot in recent months.

Security issues in the Red Sea. North American governments hitting China with new trade tariffs. The Panama Canal is slowly seeing its water levels return to normal after a long drought. The Russia/Ukraine war continues to disrupt supply chains, and then there's the "elephant in the room," automation of North American container ports.

Like it or not, automation is slowly creeping into U.S. ports and, according to the Government Accountability Office, "All of the 10 largest U.S. container ports have adopted automation technology to varying degrees."

De-Risking

While all these events are fodder for further discussion, one topic in particular is of significance because it could impact container cargo movements.

The Asia Pacific Foundation of Canada says that, in recent years, there's been a "tectonic shift" in global manufacturing to "de-risk" from China due to, among other things, escalating U.S.-China tensions. Manufacturers have reduced their presence in China and moved operations to other countries such as Mexico, Thailand, Vietnam and even India.

The Port of Los Angeles (LA) illustrates this shift. At the end of 2022, China accounted for 57 percent of LA's overall trade volume. Today, it's down to about 43 percent, says port spokesman Phillip Sanfield.

The change hasn't impacted overall volumes, however. LA handled a record 939,600 TEUs in July, a 37 percent increase over the previous year. It was the best July in the port's 116-year history. Seven months into 2024, LA is 18 percent ahead of its 2023 pace.

"We've seen an influx of year-end holiday goods coming across our docks a bit earlier than usual to avoid any risk of delay later in the year," says Gene Seroka, the port's Executive Director. Overall, Los Angeles has moved 5,671,091 TEUs the first seven months of 2024.

John Painter, CEO & Founder of Guangzhou Port America, Inc., which partners with the Port of Nansha, China, is paying close attention to the tariff issue. He says a lot of shippers may be sourcing out of Southeast Asia and India to mitigate the risk of sourcing out of China or China plus one.

"But once you look at the volume growth exiting China ports, year-to-date, that does not reflect the case at all," says Painter. "So I asked my folks if we could drill down on these numbers to see if that is true. The rest of the world is saying, 'We don't have a problem with that,' so staying in China may be a different story for North America because of the political tensions."

Painter says volumes are up to North America from Nansha this year by approximately 25 percent, plus three new services are scheduled for March 2025: one MSC All Water via the Panama Canal and two via the new Gemini Alliance.

"Hence, carriers and beneficial cargo owners are recognizing the value," Painter adds.

Nansha, in the West Pearl River Delta, is the fifth busiest port in the world, handling over 25 million TEUs in 2023. It also recorded 400 percent growth last year in the amount of fruit handled through its cold and dry storage facility. In the first quarter of 2024, Nansha had total container throughput of 5.92 million TEUs with year-on-year growth of 10 percent.

The Port of Long Beach, just south of the Port of Los Angeles, is also thriving. It says August was the strongest month in its 113-year history, handling 913,873 TEUs, up 34 percent from the same month last year.

"Cargo diversions and concerns about upcoming tariffs are creating a busy peak season for us," notes port CEO Mario Cordero. Long Beach moved 6,087,875 TEUs during the first eight months of 2024, up 22 percent from the same period last year.

During the next 10 years, the port is planning $2.3 billion in capital improvements aimed at enhancing capacity, competitiveness and sustainability. Included in the plans is a rail project that will enable the port to move more cargo by train. Construction is expected to begin next year.

Florida Ports

Driven by a booming population, Port Tampa Bay, on Florida's Gulf Coast, has seen 27 percent growth in container traffic this fiscal year covering the nine months ending June 30, says Wade Elliott, Senior Vice President, Marketing & Business Development.

Florida has the 15th largest economy in the world which, combined with a robust tourism sector, results in a huge and growing demand for cargo. The Tampa Bay I-4 corridor is also home to the state's largest concentration of distribution centers with more than 550 million square feet of space right in Port Tampa Bay's backyard.

"The recent expansion of container services with Asia and Latin America has been critical in serving Florida's largest and fastest-growing market with most of the world's major carriers now offering service via Port Tampa Bay," Elliott adds.

Port Tampa Bay, along with container terminal operator Ports America, has accommodated this growth thanks to an aggressive terminal expansion program. Recent developments include a new expanded gate complex and the delivery of three additional STS Post-Panamax cranes. Construction is currently underway to add 30 acres of paved storage for a total of 100 acres and a berth extension from 3,200 to 4,500 linear feet.

Port Everglades, on Florida's Atlantic Coast, has launched a five-year project to upgrade its complement of seven Samsung Post-Panamax, low-profile, rail-mounted container gantry cranes at its primary container facility in Southport, according to Jorge Hernandez, Director of Business Development.

Container ships are getting larger and carrying heavy loads, making it necessary to design, retrofit and modify the cranes to meet future demand. Everglades, which handles considerable trade with the Caribbean and South America, is adding King Ocean Services, in partnership with Betty K Agency Limited in Nassau, to offer twice-weekly sailings.

In year-to-date cargo volumes through the end of June, Everglades has shown a five percent decrease in TEUs compared with 2023. However, there are positive signs. "Maersk Line continues to grow its presence at the port while MSC and CMA CGM are also trending positively," Hernandez states. "Trade growth in countries from Asia, including Korea, Singapore and India, is notable, and Germany and Turkey are still showing significant growth."

PortMiami has embarked on a $4.2 billion capital improvement program over the next five years, all centered around net-zero efforts with a focus on container-moving equipment.

"We've embarked on a visionary and transformational program to develop the nation's first end-to-end, net-zero carbon emission supply chain in line with Miami-Dade County's 2030 goal to reduce emissions by 50 percent," explains Hydi Webb, PortMiami CEO & Port Director. "Future projects include hybrid/electric tugboats, new super Post-Panamax electric gantry cranes, cargo yard modifications and railyard capacity upgrades."

Baltimore

The Port of Baltimore continues to recover from the Key Bridge catastrophe in March.

"Truck transactions through our Seagirt container terminal have averaged about 3,300 per day since September 5, approximately 1,000 a day higher than in August and approaching our average of about 3,500 per day before the Key Bridge incident," says Richard Scher, Director of Communications, Maryland Port Administration.

July cargo numbers at the port's public terminals included a jump of 39 percent for imported cars and nearly 12 percent overall for cars year-over-year.

"While our container volumes are still down compared to last year because of the Key Bridge incident, we're nearly back to our normal allotment of ship calls," Scher adds.

Ports America Chesapeake, which operates the Seagirt container terminal, is making significant investments in new equipment and infrastructure. Along with Neo-Panamax ship-to-shore cranes, it's adding more rubber-tired gantry cranes and putting a focus on sustainability and efficiency. An electrification project at the terminal will help reduce its carbon footprint while the Vail Street truck gate that will open later this fall will further improve truck movements.

Tom Peters writes from Halifax, Nova Scotia.