The ports of Los Angeles and Long Beach are experiencing a decrease in container volumes due to the impact of tariffs placed on Chinese goods and the extended peak season coming to an end.
The Port of Los Angeles is the largest port in the United States, followed by the nearby Port of Long Beach, and both are major distribution hubs for Chinese manufactured goods.
In 2018, U.S. ports in general benefited from higher imports, largely thanks to shippers trying to transport goods from China before each round of U.S. Section 301 tariffs kicked into gear.
In July, the U.S. implemented a 25 percent tariff on goods from China totaling $34 billion in annual import value. In August, the U.S. deployed a second tranche of 25 percent tariffs on goods from China with an annual import value of $16 billion. And in September, the U.S. enacted a 10 percent tariff on goods from China with an annual import value of $200 billion.
The U.S.-China trade war has no clear end in sight, but the Trump administration has delayed the increase in the third round of tariffs from the current 10 percent rate to a rate of 25 percent. The administration also has sent trade representatives to China this week in hopes of making progress on a deal.
As a result of shippers front-loading cargo from China to the U.S., which caused an extended peak season in 2018, the Port of Los Angeles saw container volumes grow 1.2 percent from 2017 to 9.46 million TEUs, while the Port of Long Beach saw container volumes grow 7.2 percent to 8.09 million TEUs, as illustrated in the chart below.
Although the ports of Los Angeles and Long Beach were able to establish growth in 2018, recent data suggests a bleaker outcome for 2019.
The Port of Los Angeles on March 15 released data for the month of February that showed a significant decrease in container volumes from February 2018 figures.
The chart above illustrates the performance of the Port of Los Angeles this February. Loaded imports receded from 383,090 TEUs in February 2018 to 348,316 TEUs this February, representing a 9.08 percent reduction year-over-year. Loaded exports also dropped from 157,591 TEUs in February 2018 to 142,555 TEUs this February, accounting for a 9.54 percent decline year-over-year. Total empty TEUs increased 16.3 percent year-over-year, from 184,379 TEUs in February 2018 to 214,436 TEUs this year.
The Port of Long Beach also released February data on March 15 that showed a significant decrease in volumes year-over-year. The chart below illustrates the performance at the Port of Long Beach compared to last February.
Loaded imports at the Port of Long Beach declined from 342,247 TEUs in February 2018 to 302,865 TEUs this February, a decrease of 11.5 percent year-over-year. Loaded exports dropped from 130,916 TEUs in February 2018 to 105,287 TEUs this February, showing a reduction of 19.6 percent year-over-year. Total empty TEUs were relatively flat, with a 0.1 percent decline from 188,628 TEUs last February to 188,465 TEUs this February.
Bluewater Reporting is cognizant of any changes on the transpacific lane as it pertains to the largest international importer and exporter, the U.S. and China. Using the Bluewater Reporting Capacity Report, we can cross-reference the previously expounded port data for February with our database.
The chart below illustrates capacity on the trade from China and Hong Kong to North America (U.S. and Canada) for the February reporting periods in 2018 and 2019, according to data from BlueWater Reporting’s Capacity Report.
Trade from China and Hong Kong to North America correlates to the data from the ports of Los Angeles and Long Beach. Although weekly deployed capacity on the trade modestly increased between the two reporting periods, from 311,834 TEUs to 314,475 TEUs, weekly allocated capacity fell from 126,758 TEUs to 118,407 TEUs.
The increase in nominal TEUs is a phenomenon seen across the maritime industry as ships continue to get larger. Typically, nominal TEUs increase in unison with allocated TEUs, suggesting that outside factors like the trade war are impacting this trade lane.
Going forward, the ramifications of the trade war are starting to become clear. If the U.S. and China cannot resolve their trade dispute, both economies will continue to have reduced growth and trade on the transpacific lane will continue to fall. If the U.S. and China can come to an agreement, trade on the transpacific lane will increase to the benefit of both countries. A prolonged trade war would significantly impact both the U.S. and Chinese economies.