As businesses and governments around the world work to offset the impacts of the global pandemic, North America’s seaports appear to be faring well during this period of uncertainty. Already impacted by 2019’s trade and tariff wars—and the subsequent fluctuations in overseas freight movement—North American ports moved into 2020 with some experience navigating disruption already under their belts.
According to Logistics Management’s Patrick Burnson, North American ports generally have numerous safeguards and a strong financial cushion on their sides when it comes to weathering the coronavirus pandemic. “However, ports that primarily handle cargo are expected to fare better than those with substantial cruise operations,” Burnson writes, “which are expected to have sizable downside risk.” (In June, cruise lines voluntarily suspended trips from U.S. ports until September 15th.)
With global markets now dealing with COVID-related economic pressures, Burnson says North American ports could face substantial volume stress for the balance of 2020. “Seeing their exposure to demand risk and sensitivity to the economic performance of both the markets they serve and their trading partners,” he writes. “Fitch (Ratings) undertook a stress test analysis of its rated North American ports, to assess multiple scenarios, taking into account port revenue mix and potential for recovery.”
On the cargo side, Fitch’s stress tests assume drops in cargo volumes will exceed those seen during the global financial crisis, the SARS outbreak of the early 2000s and Sept. 11.
“North American ports have diversified revenue streams, amortizing debt profiles and sound liquidity positions that provide stability during periods of stress,” Fitch Senior Director Emma Griffith, told Logistics Management. “North American ports have also demonstrated revenue resilience through economic downturns as severe as the Global Financial Crisis, reflecting both the essentiality of global trade and the presence of strong contractual agreements at many ports.”
Other factors working in North American ports’ favor include the fact that most were deemed “essential” during the shutdowns, with employees continuing normal hours of operation during that period.
A Mixed Bag
In examining the activity at various North American ports, Port Strategy says ports in California are seeing “significant cargo volume decreases” as COVID-19’s impact on shipping becomes clearer, although not all ports have suffered. Where the Port of Los Angeles saw a nearly 30% drop in cargo movement in May 2020 versus 2019, for example, cargo shipments rose at the Port of Long Beach in May as the economic effects of COVID-19 started to subside.
“Dockworkers and terminal operators moved 628,205 TEUs of container cargo last month, a 9.5% increase from May 2019,” Port Strategy reports. “Imports grew 7.6% to 312,590 TEUs, while exports climbed 11.6% to 134,556 TEUs. Empty containers headed back overseas jumped 11.4% to 181,060 TEUs.”
The port has moved 2,830,855 TEUs during the first five months of 2020, 5.9% down from the same period in 2019. “Our strong numbers reflect the efforts of our Business Recovery Task Force, which is setting the path for efficient cargo movement and growth,” the port’s executive director said in a press release. “Our focus on operational excellence and world-class customer service will continue as we prioritize our industry-leading infrastructure development projects.”
Second-Half Rebound in Sight
US import and export volumes in the first three months of 2020 show a continued trend toward growth of East and Gulf Coast ports at the expense of West Coast ports, JOC reports. East Coast ports increased their market share of total US container volumes by 2.3 percentage points compared with January-March 2017 to 49.5 percent.
The other top gateways—especially East and Gulf Coast ports, which are more diversified in their trade with Europe and Latin America—registered declines in the low- to mid-single-digit range, JOC reports. It says port directors indicate that cargo volumes may start to pick up in the second half of the year as retailers ship holiday-season merchandise.
“After more than two consecutive years of growth in the US container trade, the total laden imports and exports declined 4.6 percent in the first quarter of 2020 from the same three-month period last year,” it adds. “Highlighting the devastating impacts of the US-China trade war and COVID-19 pandemic, the 10 largest ports in the US all registered declines in laden container volumes.”
It’s important to note the recovery may be uneven throughout the US, as each region has set its own timetable for reopening the economy. JOC says this could have an impact on coastal port volumes in the coming months. “We are committed to come back in September with an updated forecast based on what we see over the summer,” the Port of Norfolk’s CEO told JOC, “because it’s still really fluid.”