PMSA Analyst warns of continued decline at Port of Oakland

June declines at the Port of Oakland placed it below the pre-COVID levels of 2019: “Total container traffic YTD (year to date) through this June (1,012,154) was 19.3% shy of the mark set during the first half of 2019, which was the lowest number of loads and empties that passed through the port during the first half of any previous year since 2009,” according to the Pacific Merchant Shipping Association’s (PMSA) West Coast Trade Report.

The report went on to state: “In part because of labor slowdowns ... Inbound loads (66,295) were down by 18.0% from June 2019. Outbound loads (54,138) were not only off by 27.7% from four years earlier, but they were also the fewest recorded in any June so far in this century.”

In his commentary on the State of the Port of Oakland, which appears in the same PMSA West Coast Trade Report, economist Jock O’Connell explains that the Port is facing long-term problems: “At the turn of the century in 2001, Oakland was the nation’s fourth busiest container port, trailing only the Ports of Los Angeles and Long Beach on the West Coast and the Port of New York/New Jersey on the East Coast. Since then, it has been surpassed by the Ports of Savannah, Charleston, Virginia on the Atlantic Coast and by Port Houston on the Gulf Coast. It also trails the volume of container traffic moving through the Northwest Seaport Alliance Ports of Tacoma and Seattle in Washington State …”

O’Connell notes that based on previous projections, Port of Oakland volumes should be 1-3 million TEUs higher than they are today: “Oakland has had forecasts, such as one produced just prior to the Great Recession, that anticipated that the port would be handling 5,087,000 loaded and empty TEUs by 2020. As the recession wound down, a revised forecast was commissioned that pared those numbers back to 3,427,000 TEUs. For those keeping score at home, the port actually handled 2,461,889 TEUs in 2020.”

Agricultural Exports

The result is that the prolonged declines may continue, he says, especially if renewed droughts adversely impact agricultural exports which had historically been the bright spot for the Port: “Where does the port go from here? How does it escape devolving into a niche port serving the considerable but still limited international shipping needs of the Bay Area and adjacent areas of Northern California and Nevada? Forecasts ultimately rely on fairly broad economic and demographic trends. But the population and economic growth outlooks for the region are fast being revised downward, and an unprecedented series of winter storms may only have forestalled the full impact of a prolonged drought on production agriculture in the Central Valley. “

O’Connell says that Oakland’s fundamental problem “is its perilous position in the routes charted by transpacific shipping. It is not a first-call port, although it aspires to become one. At least until the Great Disruption brought on by the COVID-19 pandemic, ships steaming eastbound across the Pacific normally called first at one of the big San Pedro Bay ports in Southern California, where they would disgorge the majority of their containers. They would then journey up the coast to Oakland, where far fewer TEUs would be discharged, before sailing back across the Pacific. As the last port-of-call, Oakland did benefit from exporters eager to expedite their shipments, often of perishable agricultural commodities, to the markets of East Asia. For many years that enabled Oakland to boast of being the only major U.S. seaport to export more than it imported.”

O’Connell added that way back in 2001 “60.9% of the 1,245,347 loaded TEUs that passed through the port were outbound. By 2018, however, inbound loads had gained the upper hand. Last year, 56.6% of all loaded TEUs were inbound. Global trade dynamics being what they currently are, the Port of Oakland risks slipping into the diminished status of a regional port, one largely serving the import and export needs of shippers in the San Francisco Customs District (SFCD) that encompasses Northern California down to Fresno and parts of northern Nevada…”

Difficulty in Attracting First Calls

O’Connell concludes by dismissing the strategy to make Oakland the first port of call on the West Coast: “A much too facile but widely touted bromide to solve Oakland’s doldrums calls for the port to attract more first call service. With more and more discretionary cargo being sent to ports on the East and Gulf Coasts, that’s going to be a tough sell. Even if there were shipping lines that could be persuaded a profit could be made by sailing one or two vessel strings directly to Oakland, would that really be enough to alter the reality that Oakland will continue to remain the stepchild of the much bigger Southern California ports, which continue to aggressively vie with Oakland for the agricultural export trade out of the Central Valley and, if ocean carriers cannot be found to offer first-call service, then what?”