In early 2022, the Port of Long Beach (POLB) was dealing with a long queue of inbound vessels waiting to be unloaded and waiting offshore, with the tally, at one point, up to 109 vessels, observed POLB Executive Director Mario Cordero on a recent media conference call.
By the end of 2022, though, that queue, he said, “was long gone," as the import surge had abated, coupled with United States supply chain activity returning to more normal levels of activity and, in some months, the slowest months seen at the port in some time.
The story in 2023, as it relates to volumes and cargo flows, at POLB, has been along the same lines, to a degree.
“In line with what has been happening throughout the industry, POLB started off 2023 with some sizable year-over-year reductions in volume,” said Cordero.
And when import volumes change quickly at the San Pedro Bay Ports Complex, which also includes the Port of Los Angeles, and is the most important trade route in the United States, with the Transpacific at the epicenter of U.S.-East Asia trade, Cordero said that those ports are the first to feel that impact.
In the first quarter, Cordero said POLB volumes were down 30% annually, with the U.S. total of imports down 22%, for the same period. But in April, the port had its best month going back to October 2022, while still posting a 20% annual decline, although it was up sequentially.
While its official May numbers are not yet in, Cordero said that according to POLB estimates, May is pegged to come in at around 720,000 TEU, which would represent around a 15% annual decline.
“While not matching up to the pandemic years of 2021 and 2022, it is a positive trend and brings optimism that we will continue to see some growth for the remainder of this year,” he said. “The pandemic years have caused some unusual fluctuations in cargo, with lows first, and then highs, and then back down. As we look to 2019 for some insight as to how we compare to a more typical year for the San Pedro Bay ports…2023 is looking very similar to 2019. The good news is we are stabilizing at the pre-pandemic levels of cargo volume and have come down double-digits percentage-wise but only from the pandemic surge levels of cargo.”
For the remainder of 2023, Cordero explained that, on average, POLB is expecting around 700,000 TEU per month, with those estimates highlighting how the port does not expect a typical Peak Season in 2023.
“Instead, it is just a plateau,” he said. “With our projections, we expect to be in a best-case scenario of 9.3 million TEU by the end of 2023, which would be about 2% up from 2022 and about 22% better than the 7.6 million TEU in 2019. We are back on a trend to more traditional cargo volume [flows].
Dr. Noel Hacegaba, POLA Deputy Executive Director and COO, said on the call that as the pandemic began and evolved, POLB focused on helping its customers move their cargo during some very challenging times.
“We responded in so many ways to ensure that the path of the fastest possible delivery of goods not only to keep the economy moving, but also to keep hospitals and first responders supplied with the medical supplies and equipment that they needed,” he said. “We did this by expanding hours of operation at our terminals, establishing the first framework for a 24/7 supply chain in the U.S. and by repurposing more than 100 acres of vacant land for temporary container storage.
And as POLB responded to the supply chain disruption, he noted it also launched new initiatives to help address legacy supply chain issues.
As an example, in response to the lack of cargo data visibility, which he described as a glaring gap that was magnified by the supply chain crisis, POLB launched the Supply Chain Information Highway, a piece of digital infrastructure that was designed to enable end-to-end visibility, and coast-to-coast connectivity.
POLB is currently in phase two of this project, he said, and is scaling up to all of its container at the Port of Long Beach.
“On a parallel track, we have enlisted the partnership of other port authorities across the country to join us in this initiative, namely the Port of Oakland, Northwest seaport Alliance, Utah Inland Port authority, South Carolina Ports Authority, Port Miami, and the Port of New York/New Jersey,” he said. Under this initiative, each ports’ data environment represents a unique on ramp to the supply chain information highway to make container status data available to shippers securely timely and efficiently.”
What’s more, in terms of efficiency and speed to market, he said that POLB is also working with its customers and industry partners on ways to accelerate e-commerce supply chains.
“Even before the pandemic online shopping was forecast to double within five years,” he said. “The supply chain crisis accelerated that trend. Now it's time to accelerate e-commerce containers that cross our docks. Following the findings of a year-long process headed by a multidisciplinary Task Force, we're putting together a pilot program that will support e-commerce supply chains by accelerating their movement through our port.
Hacebaga also touched upon POLB’s ongoing capital improvements that are moving through its pipeline, including two major on-dock rail projects.
“Last year, the pier G to Pier J double track opened and shortly the fourth track at the Ocean Boulevard project will be completed, helping our terminals to shift more cargo to rail,” he said. At the Port of Long Beach, we're literally building for the future and delivering world-class customer service to add value to our gateway. Our team and commercial operations is hard at work with our engagement efforts and making sure our customers and potential customers have the data and information they need to make the decisions to bring more cargo to Long Beach.”
Peak Season prospects: When asked how the 2023 Peak Season is shaping up, Cordero said that in a typical year, things start to get moving in July and August. But he said that, for this year, September is more likely to be the month that numbers start to increase.
“The first half of 2023 has seen double-digit volume losses,” he said. “When I say that we are going to move towards a plateau, it is really that we moving away from that negative double-digit volume loss to what, in my mind, is sort of a more normal volume that moves through the Port of Long Beach and the San Pedro Bay complex. Look to September of this year as a high number for us that brings us back into some reaffirmation of the normal movement of cargo volume here at the port.”
Economic conditions: With a slew of macroeconomic indicators giving off mixed messages about the economy, like inflation, interest rates, and inventory draw downs, Cordero said there are a confluence of economic indicators that POLB examines.
“Obviously in today's world, there's a lot of attention being placed on the inflationary rate,” he said. “And that's been good news, in terms of where we're at now, at 4.9% CPI, as opposed to the high of 9% in June 2022. It's also fair to mention that the U.S. economic activity for the month of May is better than it has been in the last 13 months. Consumer goods is a very big factor in terms of what that is to the U.S. economy. But on the other hand, today, there's a lot of focus on consumer spending on services. And I think this summer you'll find that to continue to escalate [for] things like entertainment, travel, and dining. So, I think when you look at the BCOs and the retail component, some of the retail sectors that focus on outdoor-related consumer goods, continue to climb in a very positive fashion. Admittedly, in terms of consumer spending, they're more selective, but you're also seeing a focus on increased retail discount stores.
Like his colleague Hacebaga, Cordero also cited how there is an escalation of online purchasing, with BCOs like Walmart pointing to a 27% increase in its online sales.
“I think it's a mixture right now in terms of again, the traditional look at consumer goods spending or spending by consumers on consumer goods, as opposed to services,” he said. “All of this really is in line with the forecasts that we had earlier this year, in terms of the direction of where the spending was moving to. There's been some challenges, obviously, but in the proper context, I think we're very optimistic that 2023 is not going to be as bad as some people think maybe.
Inventories: Looking at inventory drawdowns is something POLB is keeping a close on, according to Hacebaga. One reason for that, he said, is because it is a key factor as it relates to warehouse capacity within Southern California’s Inland Empire, which comprises more than 2 billion square-feet of warehouse and distribution space within 75 miles of the port complex.
“Capacity is still fully subscribed, but the issue, we understand, is that it is full—but full of the wrong stuff,” he said. “So, trying to hit the right season with the right commodity continues to be a challenge. As the supply chain realigns to normalcy and stabilizing, that is going to be another key metric that we will keep a close eye on.”