The Rise of East Coast Ports: How US Maritime Trade is Shifting

East Coast Ports Gaining Ground

While the ports of Los Angeles and Long Beach on the US West Coast still lead the nation in cargo traffic, East Coast ports have been steadily gaining ground in recent years. According to a 2018 report by the Pacific Merchant Shipping Association (PMSA), ports in the Gulf and East Coast have been catching up to their West Coast counterparts.

In terms of metric tons, the West Coast received more than double the goods from East Asia compared to the East Coast in 2017 (54.2 million tons vs. 21.8 million tons). However, the East Coast saw growth of 2.5 million tons in incoming cargo, outpacing the West Coast's growth by 1 million tons.

The PMSA report notes: "There was a time when East Coast ports handled most of the nation's container traffic. But China's rise as a global force changed that. Now, with the opening of the new Panama Canal locks and the narrowing gap in container shipping rates between the two coasts, the West Coast's dominance is increasingly at risk."

Data shows massive growth at East Coast ports, including an 8.6% increase in container shipments from East Asia in 2017. The ports of Charleston and Jacksonville saw particularly strong growth of 18.9% and 24.3% respectively.

Major Investments in East Coast Port Infrastructure

To accommodate rising import and export volumes, East Coast ports have made significant investments in recent years. Larger and deeper berths are becoming necessary to handle mega-ships and remain competitive. Crane upgrades, dredging projects, and rail terminal expansions reflect the growing demand for imported goods among US consumers.

For example, the Port of Savannah now handles 11,000 containers per day - triple the volume from 15 years ago. These investments are starting to pay off. 2017 Drewry data shows inbound cargo from Asia to the East Coast grew 8% compared to 5% for the West Coast in the first half of the year.

As Klaus Lysdal, VP of Operations at iContainers, notes: "I think there's healthy competition between East Coast ports. The geographic proximity and shared markets between these ports keeps everyone on their toes. They've all seen growth and know there's still a lot of potential."

The China Factor

Despite being separated by an ocean and continent, China represents enormous business and growth opportunities for nearly all East Coast ports. Maritime shipping from Asian manufacturing hubs to the US is estimated to add just 3% to final retail prices, with goods taking only 29 days to travel from Shanghai to Atlanta via the Port of Charleston.

In fact, over two-thirds of cargo moving through South Carolina ports involves trade with China. As Jim Newsome, CEO of South Carolina Ports Authority states: "The growth is in China. I don't think the world can function without free trade. The global supply chain is based on trade and I don't think there's any going back."

Panama Canal Expansion Changes the Game

Traditionally, importing goods from Asia to the US has been faster through West Coast ports. But data and trends from the past decade show this imbalance is slowly equalizing. The 2016 expansion of the Panama Canal may prove to be a turning point.

29 major shipping line services on the US East Coast to Asia route now transit the canal, with 15 of those being Neopanamax services. By serving as a transit point for the new generation of mega-ships, transportation costs are reduced and goods between the US and Asia now have an alternative route.

During fiscal year 2018, one in three vessels passing through the Panama Canal was on the US East Coast-Asia route. The US, China, Mexico, Chile and Japan were the top users of the canal, with 62.8% of cargo transiting the canal going to or from the United States.

East Coast ports like New York, Baltimore, Savannah and Charleston have invested heavily in expansion projects to adapt and stay competitive. Dredging for deeper berths and purchasing new cranes are just some of the measures US East Coast ports have taken to handle increasingly large vessels and volumes coming through the Panama Canal.

As a result, many East Coast ports have achieved record year-over-year growth in total tonnage, an accomplishment directly attributed to the expansions. This intense competition is good news for shippers moving cargo through the East Coast, who can continue to expect relatively fair pricing.

As Klaus Lysdal explains: "East Coast ports are preparing for mega-ships and upgrading their infrastructure in an attempt to leverage their strengths to get ahead of future demands. And as carriers are introducing larger and larger vessels on Asia-Europe routes, they're starting to cascade those vessels onto Asia-US routes, which helps bring down per-unit prices. And I don't think this trend is going to slow down anytime soon."

Major East Coast Ports

The massive West Coast port strike a few years ago forced many importers to look at East Coast port alternatives for entering the US. Some experts believe this set the perfect precedent for the Panama Canal Expansion and the opportunities East Coast ports now enjoy.

Here's an overview of the largest East Coast US ports and the changes they're making to accommodate increased demand and new opportunities:

1. Ports of New York and New Jersey

The Port of New York and Port of New Jersey are estimated to handle one-third of the North Atlantic trade. To compete with other growing East Coast ports and accommodate larger ships from the expanded Panama Canal, the port has deepened its berth to 50 feet. It recently raised the Bayonne Bridge connecting New Jersey to Staten Island in New York and can now handle ships up to 18,000 TEUs.

Annual TEUs: 6,251,953

2. Port of Savannah

The Port of Savannah is also in the midst of upgrades. Its Savannah Harbor Expansion Project (SHEP) will be completed in 2020, allowing it to handle ships up to 14,000 TEUs. The port's intermodal system is also being improved to increase accessibility and market share in the Midwest, making it a more viable and cost-efficient option. Once these projects are complete, port authorities estimate US shippers could save up to 40% on their international transportation costs by routing cargo through this port.

Annual TEUs: 3,644,521

3. Port of Virginia

The Port of Virginia is undergoing $670 million worth of expansion projects. When completed in 2020, the port is expected to increase capacity by 40%. This includes deepening its harbor by five feet, which would make it the deepest port on the East Coast. Intermodal investments have also begun, particularly expanding the port's rail connectivity and motor carrier transport.

As Joe Harris, spokesman for the Virginia Port Authority notes: "We're seeing ocean carriers and shippers diversify their supply chains and using the East Coast. Pretty soon every port up and down the East Coast is going to be 50 feet deep and we think that's going to have very positive implications for shippers whose cargo moves through here."

Annual TEUs: 2,655,706

4. Port of Charleston

Container traffic at the Port of Charleston has grown 8% annually since the end of the recession in 2009. This has been largely due to the shift in trade flows to and from Asia rather than Europe. It can currently accommodate 14,000 TEU ships, but work is underway to deepen its harbor to handle 18,000 TEU mega-ships.

Annual TEUs: 1,996,282

Looking Ahead

The rise of East Coast ports represents a significant shift in US maritime trade patterns. Driven by infrastructure investments, the expanded Panama Canal, and changing global trade flows, these ports are positioning themselves as viable alternatives to West Coast gateways. For shippers and logistics providers, this increased competition and capacity expansion offers more options and potential cost savings.

As East Coast ports continue enhancing their capabilities to handle larger vessels and greater cargo volumes, we can expect to see further changes in US supply chain strategies. The ongoing developments at these ports will be crucial to watch, as they shape the future of maritime logistics in North America and beyond.