Port of Los Angeles tops ‘cargo downturn’ since first quarter

• The Port of Los Angeles ended the first quarter of 2023 with a total of 1,837,094 TEUs, after volumes hit 623,234 TEUs in March amid a “cargo downturn.”

• March volume put the Port of Los Angeles back in first place, beating rival Port of New York and New Jersey by 620,487 TEU.

• Gene Seroka, president of the Port of Los Angeles, is optimistic about signs of economic recovery, including a ninth consecutive month of declining inflation.

The Port of Los Angeles handled 623,234 TEUs (twenty-foot equivalent units) of cargo in March, capping a weak first quarter amid what industry analysts called a “cargo slump,” putting the port back at the top of the industry.

The port, consistently the top trade hub in North America, handled 1,837,094 TEUs in the first three months of the year, down 32% from the same quarter in 2022 and the best first quarter in the port’s history, according to Port of Los Angeles executives.

The Port of Los Angeles has risen to the top of the list by 620,487 TEU over its rival, the Port of New York and New Jersey, the largest gateway on the U.S. East Coast, after losing its spot in February to the Port of New York and New Jersey. The Port of Los Angeles first lost its spot to its rival in August 2022, when traders wary of congestion made a major shift to the East Coast, but regained the top spot in January.

“Economic conditions caused a significant slowdown in global trade in the first quarter, but we are beginning to see signs of improvement, including a ninth consecutive month of declining inflation,” Port of Los Angeles Executive Director Gene Seroka said.

“Although cargo volumes in March were lower than the same period last year, early data and month-on-month growth point to a modest increase in the third quarter.”

Seroka presented the first-quarter data at a press conference joined by Volvo Trucks North America president Peter Forhove and outlined efforts the company and the Port Authority are making to bring zero-emission heavy-duty trucks to market.

Volvo, along with other original equipment manufacturers, is working with the Port of Los Angeles to reach its goal of transitioning the Gateway’s freight fleet to zero emissions by 2035.

Analysts interviewed on The Freight Buyers’ Club podcast on April 11 said the post-COVID-19 slowdown in U.S. trade is affecting demand for household goods much more severely than industrial freight demand in the “freight recession.”

This explains why trans-Pacific container rates and demand have fallen much more sharply than trans-Atlantic since the second half of 2022, and why domestic trucking and air freight markets have weakened, analysts said.

Related article: Port of Los Angeles volume hits lowest level in three years

Jason Miller, interim chair of the supply chain management department at Michigan State University’s Eli Broad College of Business, said the U.S. economy isn’t showing any serious “red flags” that would indicate a recession is imminent. Instead, he said, the U.S. is experiencing a “cargo recession,” which is affecting logistics and ocean shipping routes in a variety of ways.

Miller said U.S. credit card delinquency rates remain below pre-COVID levels, mortgage delinquency rates are falling, wage growth is “very strong” and demand is strong in key sectors of the economy, including automobiles, parts and heavy equipment.

However, import demand for non-industrial products, such as clothing, computers, phones and furniture, which are usually shipped by container or air freight, fell sharply.

“Everything related to single-family housing has been hit hard by a significant slowdown in housing activity, about 30% compared to this time last year,” Miller said. This is one reason why the U.S. trucking market is in a recession starting in the third quarter of 2022, Miller said.

Judah Levine, head of research at Freightos, said this situation also explains why the market for westbound transatlantic container shipping is doing much better than imports from Asia to the US.

Levine said part of the freight slump was due to many retailers having huge inventories as import volumes increased in the first half of 2022. But he added that this had a bigger impact on the main trans-Pacific freight market than on U.S. imports from Europe.

Trans-Atlantic freight rates are down about 50% from their peaks earlier this year, but Levine said the decline is much smaller than trans-Pacific freight rates, where spot rates have collapsed, because both trades are driven by import types.

“Trans-Pacific cargo is all about consumer goods,” he said, adding that the items people are buying now are very different compared to during the pandemic, when demand for bulky household items was high.