Navigating the trade tide shift in ocean transit

Picture of John Denslinger
John Denslinger is a former executive VP Murata, president SyChip Wireless, and president/CEO ECIA, the industry’s trade association. His career spans 40 years in electronics

John Denslinger dives deep into the ocean of trade transit, revealing that growth on the Gulf and East Coast is likely to exceed that of the West Coast in the coming decade

Eighty per cent of global trade is moved by ocean shipping. That’s an incredible figure made possible by a sprawling network of ports, massive container ships and two vital canals. Ocean routes and transit times have remainedpredictable for years. America’s ports once shared the same consistency, but the ‘trade tide’ is changing that.

To be competitive requires investment and America’s gateways have invested heavily in port automation, harbor dredging for larger ships and improved intermodal connections for managing more cargo with greater efficiency. On the surface, it all looks incredibly smooth and seamless, but there’s plenty of importer, exporter and shipper anxiety. The yearlong labor slowdown and strike at US West Coast ports took its toll, but as of July, it’s finally over. Workers there voted to accept a six-year contract restoring stability. Also, after a two-week strike, Canadian workers ratified their four-year contract in August. The West Coast ports now seem open for normal business once more.

But ocean transit is far from normal. It appears a new normal has surfaced. The consequence of prolonged labor unrest, changing manufacturing strategies and geopolitical tensions shifted millions of container shipments from the West Coast to Gulf and East Coast ports. Manufacturers seeking supply chain resilience are likely to retain these new gateways. Likewise, as Southeast Asia and India replace China manufacturing, routing through the Suez Canal to East Coast ports becomes increasingly convenient and cost effective. These facts imply much of traffic gains at Gulf and East Coast ports may be permanent.

According to S&P Global’s Journal of Commerce, the West Coast’s share of Asia imports dropped from 71 per cent in 2013 to 56 per cent in the first half of 2023, while East Coast and Gulf share grew from 29 to 44 per cent. As for new growth, technology will definitely add substantial new market share at Savannah and Charleston ports as the southeastern states become production epicenters for EV and batteries. Both ports are well-equipped to oversee increased Asian trade with modern terminals, rapid processing systems, and integrated intermodal hubs offering unrivaled train and trucking options to the continent’s interior.

The US remains the largest importer of goods and second largest exporter in the world. That position is unlikely to change, so route and port optimization is a must. Asia traffic to West Coast ports is open waters. Asia traffic destined for Gulf and East Coast ports must pass through the Suez or Panama canals. Neither is risk-free anymore. Both can bottleneck, but the reasons differ. The Suez has been plagued by intermittent blockages, ships running aground and collisions. Most are resolved quickly but the Ever Given’s six- day blockage brought global trade to its knees queuing hundreds of vessels. Piracy along the Somalia coast was another concern, but abated quickly after US, EU and UK naval presence. As for Panama, it’s drought…lack of fresh water. Mainly fed by rainfall, LakeGatún serves as the lock’s reservoir. With precipitation 30 to 50 per cent below normal, canal operators imposed transit restrictions limiting both ship weight and number of daily ship crossings. Expect these restrictions to continue for at least 10 more months.

Indeed, West Coast port stability has returned, but its long tenure as the dominant gateway to US appears less certain. US population and technology centers are shifting southward. Supply chains are leaving China for southeastern Asia and India. Supply resilience and risk avoidance supersede cost. All signs suggest trade growth on the Gulf and East Coast will exceed that of the West Coast in the coming decade. It’s the new trade tide normal.