According to Freightwaves, "The battle for Asian containerized exports rages on between West and East Coast ports. The East had been steadily gaining ground, but COVID-19 is changing the balance in favor of the West, at least in the short term."
The second COVID-19 effect was driven by the surge in e-commerce popularity among locked-in consumers. Paul Bingham, director of transportation consulting at IHS Markit (NYSE: INFO), highlighted e-commerce when speaking to FreightWaves in April. “The brick-and-mortar ‘retail apocalypse’ that was already playing out will accelerate,” he said. “E-commerce is never going back to where it was in January. Its market share gain will be permanent.” More e-commerce could incentivize shorter delivery times from Asia. Yet again: advantage West Coast.
Demand for containerized cargo has recovered as states have reopened their economies. After the initial shutdown, businesses needed catch-up cargo on an expedited basis.
The counterargument is that all of these West Coast advantages are temporary and do not alter the long-term shift that was underway before the coronavirus crisis. Advantage — big advantage — to the East Coast. This trend has major implications for land transport. The less volume into West Coast ports, the less cargo railed cross-country to Eastern states, and the more trucked westward from Eastern ports . More volume by sea to the East Coast effectively equals higher demand for trucking and less for rail — and vice versa if the pendulum swings to West Coast ports.
Various data sets show how COVID-19 is affecting the West versus East Coast rivalry. One is spot container rates, which are tracked by the Freightos Baltic Daily Index. If rates from Asia to the West Coast are rising at a faster pace than to the East Coast, this implies more demand to the West Coast.
“In the past, you could have one massive distribution center in the center of the country, have cargo come off the container ship on the West Coast, rail it inland to the distribution center, then use trucks to feed from that hub. “Now what’s happening instead is you need speed in the last mile. So, you need multiple e-commerce fulfillment centers throughout the East,” he explained. “More container traffic will come to the East [due to higher demand for e-commerce] and you don’t need speed on the ocean part, you need speed on the last mile.”
