The loss of import TEU market share by the Southern California ports of Los Angeles and Long Beach is well known. In 2018, these two ports handled 37.7 percent of the loaded TEU entering the United States. Thus far in 2020, their share stands at 33.5 percent, a drop of 4.2 percentage points in just a year-and-a half.
But how much of this drop was due to changes that were beyond the ports’ control? An analysis of PIERS data shows that a bit less than half the lost volume could not have been avoided. PIERS is a JOC.com sister company within IHS Markit.
Through June this year, the port complex has handled just over 3 million import TEU. Had those ports held the share they possessed in 2018, their volume would have been over 3.37 million TEU. The volume loss exceeded 370,000 TEU. How much of this loss was due to changes in where the freight was coming from, versus routing changes for freight that has maintained the same origin location?
The first table lays out Southern California’s share of imports for each of the main geographic regions from where import volume is sourced. This table tells us several things:
· Share has generally dropped with regard to those regions for which LA-LB has been dominant
· This drop has been offset to a very limited extent by some gains in regions where LA-LB has a small share
· LA-LB share is greatly determined by where the freight is coming from
Let’s assume that LA-LB share in 2020 of the imports from each region was the same as in 2018. Under that scenario, the ports would have handled 210,000 TEU more thus far this year. In other words, about 56 percent of the lost volume was due to decisions which rerouted freight away from LA-LB. This loss was presumably due to service or economic issues and potentially could be addressed.
Some share loss beyond LA-LB control
The balance is more intractable in that it is due to changes in where the freight is being sourced. The second table shows dramatic changes in regional share that have recently occurred, primarily due to the nascent decoupling of trade with China.
East Asia share (including China, Hong Kong, Japan, South Korea, and Taiwan) has plummeted. Southeast Asia has been the biggest beneficiary in terms of share gain, followed by Europe, then South America and, finally, South Asia (primarily India). These shifts are problematic for Los Angeles-Long Beach because their participation in the freight from the regions gaining share is invariably lower than that from East Asia.
The conclusion is that there is a limit to how much these ports can affect their future. Better operations and better economics may help to retain or even regain some of the freight that has been lost. But the ongoing shift of volume away from their market share “sweet spot” of East Asia will make the task of hanging onto share more difficult.