Mark Szakonyi, February 11, 2015, JOC.com
When U.S. West Coast port congestion clears, there are increasing signs that shippers’ frustrations with shipment delays of weeks will spur them to permanently re-route freight through the East Coast, much like they did in 2002 following a 10-day marine terminal lockout.
“There is a great deal of analysis going on within organizations on how do we set the plate for the future so we can avoid current congestion,” a major retailer told JOC.com “It’s causing a lot of sourcing people to really sit back and take a look.”
Last year both the East and Gulf coasts grew faster than the West Coast in loaded imports, according to PIERS, a sister company of JOC.com within IHS Maritime and Trade. Loaded imports grew 8 percent on the East Coast, 7 percent on the Gulf Coast and 5 percent on the West Coast. The East Coast import market share ticked up to 40 percent from 39 percent in 2013, while the West Coast share dropped from 55 to 54 percent and the Gulf Coast remained steady at 6 percent.
In the fourth quarter when the West Coast port congestion was at its worst, the East Coast saw a 13 percent increase in loaded imports, the Gulf saw a 12 percent increase, while the West Coast saw only a 5 percent increase, according to PIERS.
CenterPoint, a major developer of logistics parks through the country, in recent months had received far more inquiries from shippers who are “fed up” with West Coast congestion and are looking to move more goods through the East Coast — whether that’s through Virginia, South Carolina or New York-New Jersey, Michael Murphy, the company’s chief development officer, told JOC.com.
Building West Coast congestion helped convince Friant & Associates, a designer and manufacturer of office furniture systems, that it should move forward on its plans to open a 375,000-square-foot manufacturing and distribution center at CenterPoint’s logistics park in Suffolk, Virginia, Murphy said. The $17.4 million facility will pull inputs from the nearby Port of Virginia. The Oakland, California-based Friant currently operates a DC in its hometown and the new Suffolk facility will be its second, when it opens in June.
“With a new manufacturing point in the Virginia, we can better serve our customers and partners on the East Coast,” Paul Friant, the company’s founder and CEO, said in a statement.
Roughly 460 miles to the south, OA Logistics, a unit of home furnishings manufacturer E&E Inc., plans to open a 1.1 million e-commerce center to avoid persistent West Coast port problems. OA Logistics, which does both in-house business for its parent company and outside third-party logistics work, hasn’t determined where exactly the DC will be but plans to tap the nearby Port of Savannah for Chinese imports.
Autos and auto parts is one commodity category where a shift to the East and Gulf coasts is clearly apparent, according to data from PIERS.
In 2014 versus 2013, the East Coast saw a 12 percent increase in auto and auto parts imports via ocean container and the Gulf Coast saw a 19 percent increase. But overall US imports last year grew only eight percent. Looking at December 2014 versus December 2013, the East Coast saw a 27 percent increase while the Gulf saw a 59 percent increase, that compared to only a 16 percent increase in the U.S. overall.
Many auto parts move via airfreight due to the urgency of keeping assembly lines in motion.
Aside from increased shipper interest in East Coast distribution space, a recent JOC.com survey also lends credence to the theory that another cargo shift might be in the making. Sixty-six percent of shippers surveyed in December said they planned to ship less cargo this year through the U.S. West Coast ports because of frustration with shipment delays. Of those planning to permanently shift cargo, the majority said most of of rerouted freight would come through the U.S. East Coast.
Once U.S. West Coast congestion clears — a conclusion dependent on the International Longshore and Warehouse Union and waterfront employers reaching a contract — JOC.com will survey shippers again to see whether the additional two months of shipments delays have them looking at West Coast alternatives even more aggressively.