Seroka says Chinese box volumes via Mexico not a problem for LA

The rising level of Chinese container shipments entering the United States through Mexico is not seriously hurting the nation’s largest port, according to Eugene Seroka, Executive Director, Port of Los Angeles.

Seroka was responding to a question from AJOT. He said that while there had been a rise in Chinese container shipments to Mexican ports following the imposition of tariffs by the Trump Administration in 2017, the threat to the Port of Los Angeles was not significant.

In the April 2024 issue of the Pacific Merchant Shipping Association (PMSA) West Coast Trade Report, economist Jock O’Connell agreed with Seroka but added: “Chinese shipments to Mexico’s two top Pacific Coast ports have been steadily increasing and have been exceptionally brisk in recent years. Volumes rose more than six-fold to 137,874,618 metric tons in 2023 from 21,154,509 metric tons just ten years before.”

O’Connell added “It is hard to reconcile the current burst of media excitement about surging Chinese imports into Manzanillo and Lazaro Cardenas early this year with the available data.”

However, O’Connell also noted: “Growth has been particularly fast in the automotive sector. It is a share that is apt to grow due to the presence in Mexico of Chery and BYD, two of China’s premier manufacturers of electric vehicles. So, yes, the fact that Chinese companies are expanding their manufacturing capacity in Mexico will ultimately affect business at USWC (U.S. West Coast) ports but that’s nothing new.”

Biden Administration’s New China Tariffs

The increase in Chinese shipments to Mexico is happening as the Biden Administration announced a series of new tariffs on Chinese goods entering the United States including Chinese-built electric vehicles.

The objective according to a May 14th, Atlantic Council report by Josh Lipsky, senior director, is that: “Biden administration officials are trying to avoid repeating the mistakes of past decades when, they believe, the United States (and its allies) did not do enough to counter China’s unfair trade practices until it was too late and Chinese products flooded markets and cost jobs. Now they want to get ahead of the curve, especially on EVs (electric vehicles) with a staggering 100 percent tariff. It’s worth noting that only 1 percent of all US EV imports currently come from China —so this is about the future, not about now. It’s not that China hasn’t been creating overcapacity for decades; it’s that the sectors China is now doing it in are considered critical for national security. That is what is driving so much of this reaction.”

Seroka’s guest at the May media briefing was Daniel Hackett of Hackett Associates, which produces the monthly “Global Port Tracker” report for the National Retail Federation (NRF).

Hackett noted a rise in truckloads of Chinese imports coming in through Mexico:

“Another thing that we've been seeing recently is that Mexico … became the number one trade partner with the U.S. And there is a large volume of cargo coming in from China into Mexico and then being trucked across the border. If you look at … the first quarter of 2024 at Laredo (Texas), they had almost a doubling of the number of … loaded trucks with containers or loaded container trucks crossing the border to about 1.2 million in the first quarter. So, if that trend continues, that might be … stunting the growth … at some of the other (U.S.) ports where those imports from China typically occur. Now, this is still small volumes, obviously, but it is something that we are keeping an eye on.”

In response to Hackett, Seroka said:” I don't see any real impact to the trade at the Port of Los Angeles as we speak because of this particular action that was announced (i.e. the Biden Administration tariff announcement). But to Daniel's point, we'll continue to see cargo transitioning to sourcing in Southeast and South Asia (and) Mexico becoming a bigger player. And from our standpoint on a container volume … the business that we do to and from China is still about 50% of all the work here at the Port of Los Angeles.”

Seroka added that the 600% increase in Chinese imports entering Mexico, cited by the PMSA report, was not a hugely significant amount:” Relatively low base on that quote of 600% increase, but nonetheless, a real player across automotive … appliances … electronics, and … much more. The border crossings, as Daniel said, are way up, but the Port of Los Angeles also plays a key role in this area with imports that are going to the maquiladora areas. Think about Mexicali and Baja California.”

LA Port Volumes Up

Port of Los Angeles’ April cargo volume rose to 770,337 TEUs, compared to April of 2023 where the Port generated 688,110 TEUs. Imports in April rose to 416,929 TEUs, compared to April of 2023 where imports rose only 343,689 TEUs. Exports in April rose to 133,046 TEUs, compared to April 2023 where exports rose 88,202 TEUs.

Hackett noted that West Coast ports have recently increased their volumes compared to East Coast ports:” If we compare the past quarter to the first quarter of 2023, the West Coast posted surging volumes of about 24% year on year versus 11% on the East Coast. So, a huge margin, a huge difference there between the two. If we go back to 2019, though, again comparing first quarter of 2024 to 2019 on the West Coast, it's just a 5% increase, whereas on the East Coast, it's a 14% increase. Now, again, bear in mind, China tariffs were really impacting volumes to the West Coast, (in) that period.”

Seroka noted that the Port of Los Angeles received a $58 million allocation from the U.S. Army Corps of Engineers for Harbor Maintenance work. He noted that ports such as Los Angeles, Long Beach and New York/New Jersey had contributed more than they had received: “The Harbor Maintenance Trust Fund, which is managed by the U.S. Army Corps of Engineers, was established in 1986. It is funded by a 0.125% tax on the value of imported cargo and the purpose is to finance maintenance projects on our nation's waterways. For many years, the fund primarily supported maintenance dredging projects. A few ports, particularly deep-water ports like Los Angeles and Long Beach contributed roughly half of the fund's revenue, but due to naturally deep harbors and limited need for maintenance dredging, these ports received just 3% in return.”

The result was a major political mobilization to change this: “It is worth noting that the allocation of $58 million is nearly a 10-fold increase compared to the $6 million we received last year. This marks the full implementation of reforms. We will put this funding to immediate good use, expediting our repair and upgrade projects … To begin, I am pleased to say that other major ports such as the ports of Long Beach and New York/New Jersey have also received significant increases in funding. Thank you again to all our congressional supporters.”

Port Volumes Rise in Long Beach and Oakland

In April, 2024, volumes also rose at the Ports of Long Beach and Oakland as well:

• The Port of Oakland April container volume showed a 17% increase in full TEUs (twenty-foot containers) for the first four months of 2024 compared to the same period in 2023: “This reflects Oakland’s return to its historical average cargo volumes, rebounding from 2022 and 2023 declines. Full imports rose year-over-year for the sixth consecutive month (November 2023 - April 2024). The Port posted a 7.5% uptick in loaded imports in April 2024, handling 75,335 TEUs this April, versus 70,112 TEUs in April 2023. Full exports also increased 6.9% in April 2024. Port operators managed 67,566 TEUs this April, in contrast to 63,193 TEUs in April 2023. Greater schedule reliability for vessels is bringing back agricultural shippers that rely on predictable ship departures.” In addition: “It’s encouraging to see Oakland recover cargo volume as we focus on long term growth,” said Port of Oakland Maritime Director Bryan Brandes. “Our investments in upgrading Port infrastructure are paying off, and they position us ideally to capture future freight business with increasing demand.”
• Trade moving through the Port of Long Beach gained momentum in April: “Dockworkers and terminal operators moved 750,424 twenty-foot equivalent units (TEUs) last month, up 14.4% from April 2023. Imports rose 16.3% to 364,665 TEUs and exports declined 19.9% to 98,266 TEUs. Empty containers moving through the Port increased 30.7% to 287,493 TEUs. "Imports are steadily climbing as we continue to work with industry partners to rebuild our market share," said Port of Long Beach CEO Mario Cordero. "We are strengthening our competitiveness with our brand of operational excellence, customer service and ongoing infrastructure investments that will keep cargo moving efficiently well into the future.