Service reliability is more important, says port official; intermodal growth could get NYNJ to top spot

For a while, toward the end of 2022, the Port of New York and New Jersey led the nation in cargo volume, outpacing both Los Angeles and Long Beach, the usual numbers one and two. Year-end results showed NYNJ in second place, handling 9.5 million TEUs for a 5.7% increase over 2021, having overtaken Long Beach. That feat represented an impressive bump-up in the standings for the perennial number three port. And there is reason to believe Port of New York and New Jersey might be number one sooner than later, as the February TEU performance was tops in the nation — In February, traditionally the slowest time of the year for all U.S. ports due to overseas production slowdowns and closures related to the Lunar New Year holiday, NY/NJ handled 571,177 TEUs, the highest number among US ports, topping the Port of Los Angeles by more than 83,000 TEUs and exceeding the Port of Long Beach by more than 27,000 TEUs.

The diversion of cargo from West Coast to East Coast ports was one significant contributing factor to NY/NJ’s ascension. The unresolved labor negotiations on the West Coast were one reason for the diversion and fueling an expectation that some cargo would eventually return to Southern California, once terminal operators and the International Longshore and Warehouse Union (ILWU) entered into a contract. But other cargo trends, such as a southward shift in production activities in Asia, suggest that the cargo diversion will also have some sticking power.

However, these optimistic forecasts come with the caveat that while NY/NJ may be getting a larger slice of the pie, but with the current slump in demand the bigger “slice” could be marginal. As Giovanni Antonuccio, Director-Customer Engagement for APM Terminals Elizabeth New Jersey explained to AJOT, “I expect volumes to rise slightly due to regular seasonal increases. However, I feel that inflation, overcapacity, regulation, and a cooling consumer demand (to name a few) will keep any increases on the low side, especially when compared to what the industry has experienced the past couple years.”

That being said, there is something to said about being number one whether it is sports or ports.

“For us, it comes down to reliable service,” said Mike Bozza, deputy director of the Port Authority’s port commerce department. “We want to be seen as the gateway where people can get their goods to market quickly.”

Contributing to that perception, for Bozza, are “the people that we have here.” “We have a very dedicated labor force,” he explained. “The longshoremen have been tremendous throughout the pandemic. We have an extremely dedicated trucking community. And the Port Authority convened the Council on Port Performance several years ago, a group that was absolutely critical during the pandemic and continues to this day.”

Port Council

The council, the brainchild of port commerce director Beth Rooney, brings together a group of harbor stakeholders, including the Port Authority, marine terminal operators, motor carriers, railroads, labor unions, and governmental agencies. “The group met throughout the pandemic to work on the challenges we faced and was instrumental in coming up with solutions,” said Bozza. “The council allows us to tackle the supply chain holistically.”

Among other things, the council identified 90 available parcels in the port region that were made available to cargo owners who needed to store and position containers. The council was also instrumental in developing, tweaking, and implementing the empty container fee, which motivated carriers to evacuate excess boxes from the piers, helping to alleviate congestion. Even before any fees were levied, ocean carriers responded by increasing the number of empty loaders, making second port calls in New York to evacuate empties, and chartering space on the outbound vessels of other carriers to reposition excess boxes.

Adjusting to New Expectations

With container volume up 5.7% over 2021 and 25% over 2020, volumes not planned for six or seven years, the port also benefitted from some forward-thinking investments by the Port Authority and its maritime terminal tenants. On the Port Authority side, the raising of the Bayonne Bridge allowed the port to accommodate larger container vessels, as did the 50-foot deepening of the shipping channels, primarily a federal project. The Port Authority’s $600 million in rail investments significantly enhanced the port’s intermodal infrastructure and provided it with a selling point to attract more cargo destined for inland locations.

“Our marine terminal operator partners also made significant investments in advance of the increased cargo coming in,” said Bozza, “in the form of new ship-to-shore cranes and straddle carriers, which helped us to manage the cargo flows.”

Bozza estimated that around 90% of NYNJ’s incremental cargo increase last year came from West Coast diversions, raising the question of whether shippers will stick with the Port of New York and New Jersey or return cargo to West Coast ports once the labor situation there stabilizes. Year-to-date totals as of the end of February show that container volumes are down by 20% from 2022.

“There was a tremendous amount of front loading in 2022 by beneficial cargo owners (BCOs) who were building up inventories,” said Bozza. “And what we’re hearing through our consultations is that they’re burning through those inventories. The folks we’re talking with are telling us that the first half of the year is likely to show a softening from last year, but that things should pick up in the second half of the year as BCOs restock their inventories.”

As for whether cargoes will return to the west, “the shippers we are speaking to are telling us that they are looking to keep a piece of their cargo in the east,” said Bozza. “And I think it goes back to reliability. They are waiting to see if things smooth out a little bit on the West Coast and the labor piece is a big test. Then we’ll see who’s staying and who’s leaving.”

Shifting Trade and Supply Chains

Also favoring the sticking power of East Coast ports like NYNJ is the change in manufacturing locations in Asia. “We’re seeing less cargo coming from China, and increases, in terms of the percentage of cargo, from other countries like Vietnam, India, and Indonesia,” said Bozza. “As you shift production south from China, it makes more sense to go through the Suez Canal and come to the U.S. East Coast, versus a West Coast routing.”

All things considered, could the Port of New York and New Jersey someday make it to become the premier container port in the nation? “We’d love to be number one,” said Bozza. “But we want to be number one and continue to provide the great service that we’ve been providing.”

This year’s port performance could foretell what’s in store for the port. “It’s true that our overall cargo is down in the early part of this year, but our rail lifts are up,” said Bozza. “That means that we’re handling more cargo for inland destinations like Chicago, Detroit, and Indianapolis. We’re doing well competing with the West Coast, but also with other East Coast gateway ports on intermodal cargo. If we do make it to number one, it’s going to be by growing that intermodal share.”