International trade tensions, notwithstanding, the U.S. coastal port sector created 2.2 million jobs last year as marine cargo activity generated about $5.4 trillion of total economic activity.

According to the recently released report “2018 National Economic Impact of the U.S. Coastal Port System,” underlying trends suggest that logistics managers will continue to rely on a diverse mix of ocean cargo gateways in the future.

Martin Associates, a consultancy working with the American Association of Port Authorities (AAPA), notes in the report that, over the past five years, Federal, state and local tax revenues generated by port-sector and importer/exporter revenues rose nearly 18% from $321.1 billion to $378.1 billion, while personal wages and local consumption related to the port-sector increased from $1.1 trillion to $1.4 trillion. Furthermore, the average annual salary of those directly employed by port-related businesses jumped from $53,723 to $62,800—a 17% increase.

John Martin, president and founder of the Lancaster, Pa.-based firm, presented the report at last month’s AAPA 2019 Spring Conference in Washington, D.C. “The sizable growth over the past five years in the number of jobs that American deep-draft ports support, the wages those jobs pay, and the tax revenues that are collected from the cargo activities at these ports is really quite impressive,” he says.

Source: Panjiva

However, is this growth sustainable without more federal government investment? Port association leaders think not.

Kurt Nagle, president and CEO of the AAPA, maintains that the need for this is significant and urgent. “We have identified a combined $66 billion in needed investments over the next decade,” he says. “These necessary federal channel, terminal, road, rail, bridge and tunnel improvements are crucial to enable our seaports to efficiently handle their expected cargo volumes and continue to provide positive effects on the local economies.”

Resiliency factor

However, the solvency of “Top 30 U.S. Ports” is hardly in question, says Fitch Ratings’ senior director, Emma Griffith, who notes that shifts in centers of production, and the advent of disruptive technologies add further complexity to cargo throughput levels.

“Major ocean cargo gateways remain resilient,” says Griffith, “and this trend has been evident over the past decade with container traffic outpacing economic growth rates despite volatility through the last recession.”

However, Griffith adds that increasing vessel sizes coupled with supporting infrastructure may be reaching a maturation level. “Growth rates are slowing relative to historical averages as these trends mature. And volume growth, while expected to continue, will likely more closely mirror that of global GDP.”

Regarding U.S.-China trade relations, primary ports of call will be able to “weather the storm” despite elevated concentration in Chinese trade exposure in some cases, says Griffith. “Conversely, smaller and more specialized ports will have less leeway to offset major losses in imports and exports if commodities handled are targeted by tariffs.”

Finally, recent changes in trade policy between Asia and the United States are clouding future performance of the Panama Canal’s container business, Fitch Ratings concludes. “Some ports may be investing too much and too quickly in mega cranes and warehousing in misguided anticipation of attracting more cargo,” says Griffith. “But then again, they might be right. For the time being, most major ports in the United States and elsewhere are taking an ambitious approach toward growth.”

East Coast “usurpers”

The global trade intelligence firm Panjiva notes that while Los Angeles and Long Beach continue to hold the crown, the Port of New York and New Jersey plays “the usurper.”

“U.S. seaports had a bumper year in 2018 with a 7.8% year-over-year growth in seaborne shipments to reach a record 28.9 million twenty-foot equivalent units [TEUs],” says Chris Rogers, research director at Panjiva. “A late surge in shipments from China, driven by tariffs, was the largest factor, though shipments from South Korea also did thrust due to the strong economy earlier in the year.”

According to Rogers, the outperformance of Asia versus Europe in terms of exports to the United States was not a major factor in individual port performance, however. Imports to Los Angeles and Long Beach, which retained their dominance as the largest ports for inbound shipments with 17.4% and 15.1% of the total respectively, lagged the average with growth of just 5.4% and 6.8% respectively. Instead, shipments to the West Coast appear to have prioritized the smaller ports including Seattle—which grew 27.5% and outpaced its neighbor Tacoma—and Oakland, which climbed 9.4%.

New York came closer than ever to overtaking Long Beach as the 2nd largest port for imports after the raising of the Bayonne Bridge and investments by Maersk in new cranes allowed a 12.8% rise in shipments, leaving it with a 14.5% share of all seaborne imports to the United States.

The widening of the Panama Canal in 2016 has served to help ports in the southwest of the United States as the container alliances continued to rearrange their services. Imports to Miami and New Orleans rose 20.8% and 12.1% respectively while Houston remained capacity constrained, growing by only 6%.

In the end, investments in new capacity also likely helped Savannah’s 10.8% expansion that, along with New York and southeast port growth, likely took market share from Norfolk, which grew by only 1.5%, and Charleston, which had shipments climb by only 2.8%.

“So far, 2019 has proven more difficult with an unwinding of the late inventory combining with a weaker international trade environment to create a challenging situation for the ports,” concludes Rogers. “In the meantime, investments to reduce congestion including harbor deepening, new cranes, automation, inland port construction and alternative drayage systems such as barges will be needed to ensure the long-term growth of the nation’s maritime trade economy.”

Labor versus technology

Descartes, a consultancy and software-as-a-service provider for logistics management, recently shared similar observations on the top U.S. ports, noting that the advent of new information technologies is not likely to displace dockworkers in the near future.

“We feel that organized labor is receptive to more automation, but perhaps not at the same pace as management would like,” says Brendan McCahill, senior vice president of trade data content at Descartes. “In all the top ports, automation is already employed with gate movements, container stacking, cargo releases and the cycling of containers in the loading and unloading process.”

McCahill is less certain that artificial intelligence (AI) and blockchain will be as transformative in port operations near-term, however. “Financial innovation cuts close to the bone, and it seems that AI and blockchain are often in the same sentence as bitcoin, so there’s some skepticism there,” he says. Meanwhile, he believes that ports will attempt to keep pace with utilizing technologies embraced by mega shippers, like Walmart.

“These will likely differ by the available capitalization,” concludes McCahill, “but just as we saw more computerization and digitalization take hold in the past century, it’s only a matter of time.”