USWC docker deal will not stem US import drift from West to East Coast

Logistics investments have locked in some trade to eastern terminals, says RILA’s Jessica Dankert

The expansion of the Panama Canal locks and ambitious port investments have helped shift the logistics watershed of the US eastwards, claims Alphaliner’s Jan Tiedemann

The “tentative” end of the impasse between US West Coast dockers and liner and port interests will not lead to the mass return of cargo to West Coast terminals, either this year or in the medium-term, according to leading shipping and retail experts.

The Pacific Maritime Association (PMA), representing port interests, and the International Longshore and Warehouse Union (ILWU), representing more than 22,000 dockworkers at terminals stretching from California to Washington, finally agreed a ‘tentative’ new deal earlier this month, some 13 months after negotiations opened.

The uncertainty around negotiations prompted many shippers to route cargo via alternative entry points on the US East Coast and Gulf Coast, and even via Mexico and Canada.

However, Jessica Dankert, Vice President Supply Chain, Retail Industry Leaders Association, (RILA), told the latest episode of The Freight Buyers’ Club podcast, produced with the support of Dimerco Express Group, that the deal was too late to affect significant volumes in 2023 given that it has not been fully signed off, and large volumes of imports have already been assigned to container services calling at US East and Gulf Coasts terminals.

“I honestly don’t think that all of that volume is going to head back to the West Coast,” she said. “I think the uncertainty around the labour negotiations was certainly part of those decisions of that migration of the cargo volumes to the East and Gulf Coast, but it wasn’t the only factor that was playing into that.” [See video here and below]

Dankert cited infrastructure shortfalls at West Coast terminals and inland, as well as faster population growth in the US in more eastern and southern States.

“The majority of the US population is in the East,” she added. “A lot of that volume has been shifting even before the pandemic, so it’s not a new thing necessarily driven by the [labour contract negotiations] or the uncertainty around that.

“There’s been a migration that’s been happening and some of these things have maybe expedited some of that process.

“I think some of it comes back, but some of it doesn’t.”

Panama Canal locks speed push to East Coast

Jan Tiedemann, Head Analyst at shipping consultancy Alphaliner, told The Freight Buyers’ Club that another factor in more cargo heading towards East and Gulf coast ports was the expansion of the Panama Canal’s locks in 2016. This had enabled larger ships to transit from Asia into East Coast rather than West Coast terminals without needing to go via the Suez Canal.

Heavy investment in ports has also fuelled the switch. “In a way, the watershed in the continental US, which basically marks on your mental map the places where it’s easier to supply via East Coast ports with truck and rail, that watershed has moved a little further in favour of the East Coast ports.”

Dankert argued that the supply chains that have now been built up to support the shift in cargo including new distribution centres and efficient freight networks would likely remain attractive to shippers.

“It’s hard to shake those up again when you don’t need to necessarily,” she said. “As long as it remains the same or a comparable cost to move things domestically, I think you’ll see a little bit more of a stasis of where things currently are. I don’t see all of that volume ultimately returning to the West Coast.”