After starting off the last year contending with a huge downward swing in cargo volumes, the Port of Los Angeles and Port of Long Beach each closed out 2023 strong and with reason for optimism moving forward.
With the days of sky-high imports and dozens of ships queued up on the horizon gone – largely thanks to high consumer demand and disposable income during the Covid-19 pandemic – the ports faced a not-unexpected decline in ship activity for essentially the first half of the year.
After looking back at the pandemic-induced bottleneck, “fast-forward to 2023 and we’ve got a downshift in the economy, runaway inflation, high interest rates. America stopped buying big screens and barbecue and apparel,” explained Kevin Turner, an executive managing director with Cushman & Wakefield who studies the ports. “We started going to bars. We started going to games. We started getting on airplanes again. Those things don’t come in container ships. We were just spending in different areas.”
Unfazed, the two neighboring and complementary entities soldiered on with various infrastructure upgrades and long-term planning. And then, the prospect and ratification of a new labor agreement provided the catalyst the ports needed to return to their pre-pandemic trajectory.
“Right now, we’re seeing us gain that market share back and, overall, a confidence boost since that labor agreement was ratified,” said Logan Hood, a research analyst at the downtown office of Chicago-based real estate services firm Jones Lang LaSalle Inc. who studies port activity. “I think a return to normalcy was kind of the theme of the year.”
The numbers
While the ports overall were down in cargo, bear in mind, that’s down – 12.9% for L.A. and 12.2% for Long Beach – when compared to 2022, which included much of the cargo ship logjam. When looking at the total sum of cargo for the San Pedro Bay Port Complex – that is, loaded imports and exports, as well as the empties – last year’s numbers were essentially in line with those from 2017-2020. Combined, the complex handled 16.7 million TEUs – 20-foot equivalent units, the standard measurement of cargo containers – last year, not a bad figure when considering that for the first half of 2023 both ports were down by nearly a third from the prior year.
“It’s a dramatic recovery from the decrease of more than 30% we saw after the first quarter of the year,” Port of L.A. Executive Director Gene Seroka said during the state of the port event this month.
The Port of L.A. moved 8.6 million total TEUs last year, of which 4.4 million were loaded imports. Meanwhile, the Port of Long Beach handled 8 million TEUs, including 3.8 million loaded imports.
While the second half of the year typically does see higher import numbers in preparation for the winter holidays, it was clear that another factor – the ratification of the labor agreement between the International Longshore and Warehouse Union and the Pacific Maritime Association in late summer – facilitated the turnaround. According to JLL’s data, monthly TEUs for the port complex jumped 15% immediately following the announcement of the labor deal, leading to five consecutive months of year-over-year gains.
“The biggest piece that was causing a lot of the decrease in volumes was the labor agreement,” JLL’s Hood said. “I feel like that was the impetus for the immediate growth starting in August as well.”
The boost solidified the port complex’s status as the top container ship destination in the U.S., and, individually, the gains were enough to boost Long Beach back to its No. 2 spot.
“Now I will say, in June and July, we had some tough numbers at the Port of Long Beach,” Mario Cordero, chief executive of that port, said during his facility’s state of the port event this month. “However, October-November, we moved more TEUs” – 755,150 and 731,033, respectively – “than any other port in the country.”
Projects in development
The ports kept busy in 2023 with ongoing work on projects that have broken ground or are expected to begin soon.
Long Beach completed adding a fourth rail track at Ocean Boulevard and commenced construction work for the Terminal Island Wye Track Realignment project. Rail operations also resumed on-dock rail operations.
This momentum, combined with the anticipated start of construction for the vaunted Pier B on-dock rail facility, led Cordero to dub 2024 as “the year of rail” for Long Beach. The $1.57 billion project will grow the Pier B railyard from 82 acres to 171 and more than triple the volume of cargo the yard can handle.
“We have been composing and designing this rail masterpiece for a long time,” Cordero said of the Pier B project, “and this year, we will start construction.”
The port also played host to a demonstration by operator Total Terminals International, which loaded 588 cargo containers onto a train that stretched to more than 15,000 feet in length – a figure Cordero expects to become the baseline once the Pier B railyard is completed in, hopefully, 2032.
“We’ve already had 3-mile-long trains, and it won’t be long before 4-mile trains are coming down the Pier B tracks,” he said.
Meanwhile, L.A.’s port saw progress on a number of public-facing projects, including the Wilmington Waterfront Promenade (which opens on Feb. 3), the West Harbor retail-entertainment park, the improvements to the State Route 47-Vincent Thomas Bridge-Harbor Boulevard interchange and the expansion of AltaSea’s facilities.
On the infrastructure side, L.A. is also taking on numerous rail improvements of its own. It’s making way for additional electrification and zero-emissions growth by, for example, improving charging infrastructure for trucks and developing a hydrogen fuel pipeline. While some detractors have criticized these efforts as being extremely costly, Seroka instead compares them to when the port first pioneered connecting container ships to shoreside electric power to reduce particulate emissions.
“We’re creating a market that doesn’t exist … yet, just like we did with shoreside power 20 years ago,” he said.
An economic engine
Speaking at the L.A. state of the port event, Mayor Karen Bass made it obvious that she values the complex’s impact on the city and region.
According to her figures, the complex was responsible for $432 billion in international trade last year, representing more than 19% of the nation’s seaborn trade. Each cruise ship that docks there generates $1 million for Los Angeles’ economy, she said. For more than two decades, Bass declared, the Port of Los Angeles has been “America’s Port.”
“The port contributes to the expansion of our city’s middle class every day, and that’s because of our nationwide reach,” she said. “The auto plant in Michigan making cars, the parts they’re using come through our port. The flatscreens playing the Rams’ Super Bowl win all across the country in 2022, they came through our port. The manufacturing for surf-inspired apparel and footwear like Quiksilver and RVCA comes through our port. The farmer in North Dakota is using a tractor with parts that came through our port.”
And while seaborn trade is up nationwide and has shifted some of the market share away from San Pedro Bay, it hasn’t dislodged L.A. and Long Beach from their prominent roles in the U.S. economy – roles that stand to grow once the railway improvements heading inland take hold.
“I think we’re reaching a new equilibrium where East Coast and Gulf Coast ports have increased their share of the imports market,” Hood said. “We’re going to see an increased volume compared to historical amounts in those ports, but also an increase in ours as well. I still see us as the gateway, especially because of time and efficiency.”
Turner, at Cushman & Wakefield, noted that while the market-share shift was partially a result of protracted labor negotiations here, other factors – chiefly significant improvements made to competing ports – were both predictable and not preventable. He added that the shift might even be necessary to avoid a repeat of the cargo ship logjam.
But, Turner added, Southern California always wins because it is cheaper and quicker for East Asian manufacturers to get their product throughout the U.S. by using Los Angeles ports. And exports from here may stand to grow, both as a result of domestic investments in manufacturing and also from Mexico surpassing China as the nation’s largest trade partner.
“We are the undisputed goods-movement capital for North America and we always will be as long as they’re making product across the pond,” Turner said. “It’s tied to transit time and shippers are focused on the lowest possible cost and getting their goods here as quickly as they can. And we have the most sophisticated Class 1 rail infrastructure and the largest North American warehouse complex within an hour of our port complex.”
