After years of losing market share to the Port of Charleston and other Southeast seaports, the West Coast is fighting back with ports there offering incentives to shipping lines that can increase cargo volumes.
The move comes as the Charleston port continues to set records for the amount of containerized cargo that moves through its terminals. In September, the port handled nearly 195,000 containers measured in 20-foot increments — the best September in the port's history and a 12.5 percent increase over last year.
The port has moved 638,600 cargo boxes in the first three months of its current fiscal year, which is 10 percent better than the same period a year ago, according to the State Ports Authority.
"We are excited to see growth across multiple business segments, as well as new customers moving into the market," said Jim Newsome, the authority's president and CEO.
The Panama Canal's expansion in 2015 made it cheaper to send cargo by containerships from Asia to the East Coast instead of dropping cargo off on the West Coast and then moving it by truck or rail.
West Coast ports have seen their market share of Asian imports drop from 72 percent to 64 percent over a five-year period, with most of those imports moving to East Coast ports, according to JOC.com.
This month, the Port of Long Beach started an incentive program that pays carriers $10 for every 20-foot container they bring in that exceeds the port's annual market share.
For example, if all trans-Pacific cargo to Long Beach increased by 5 percent but a carrier's increase was 10 percent, the carrier would get $10 for every box that exceeded 5 percent growth.
The Port of Los Angeles began offering a similar incentive program in 2018 and estimates it will pay carriers a combined $6 million to $7 million this fiscal year.
"It's a market share battle," Paul Bingham, an IHS Markit Ltd. transportation consultant, told the Los Angeles Business Journal. "They are trying to affect the (carrier's) decision at the margin."
The ports see the incentives as another tool to help them stabilize cargo volumes.
"In the end, we're going for that small portion that's not committed to one port or the other," Noel Hacegaba, deputy executive director of administration and operations for the Long Beach port, told the Long Beach Press-Telegram.
Newsome thinks the shift from West Coast to East Coast ports will continue due to population and manufacturing growth in the Southeast.
"The Southeast remains the best place to be in the port business," he said.
Last month, the Panama Canal Authority took steps to keep increased cargo flowing through its waterway — and away from the Suez Canal — with a "loyalty program" that lowers tolls for shipping lines on a sliding scale depending on the number of containers they haul in a year.
On Wednesday, the canal announced record tonnage for the fiscal year that ended Sept. 30 — 469 million tons, or a 6.2 percent annual increase. The main route, by tonnage, was between Asia and the U.S. East Coast.
So far, East Coast ports are bucking the incentives trend as cargo volumes continue to rise despite a U.S. trade war with China — Charleston's largest trading partner.
Newsome said the State Ports Authority recognizes volume increases in individual carriers' contracts, but "we do not believe that we need to offer specific incentive programs to attract volume."
"We have already a great value proposition in terms of cost and productivity," he said.
The Port of Savannah had its busiest month ever in August with 437,750 containers. The Port of Virginia handled 241,416 cargo boxes last month — 9 percent better than a year ago — and Charleston's growth in September followed a 12.9 percent increase in August.
"I don’t think you’re seeing those numbers anywhere else in the U.S.," Griff Lynch, executive director of the Georgia Ports Authority, told The Post and Courier.
By comparison, the Port of Los Angeles saw 4.2 percent growth in containers in August while the Port of Long Beach experienced a 2.3 percent decline.