East Coast ports including New York are winning a domestic trade war at the expense of California

The official container count may not be out, but the Port Authority of New York and New Jersey tells CNBC it will be the No. 1 port moving the most containers in the U.S. for the fourth month in a row.

Unresolved port labor negotiations and the AB5 trucking law — which concerns the employment status of drivers — have migrated trade away from the West Coast to the East Coast and Gulf ports, cementing what seems to be with each month a more likely permanent shift, and benefitting not only the ports but East Coast warehousing as well as the two large railroads that service the ports, CSX and Norfolk Southern. According to ITS Logistics which monitors rail cargo trends, the volume of freight moving out of the East Coast doubles that of the West Coast.

“The port is working extremely hard on making it the most attractive port for ocean carriers and cargo shippers,” Richard Cotton, the executive director of the Port Authority of New York and New Jersey, told CNBC.

There are a variety of reasons why trade is being diverted, but Cotton said the message that shippers and cargo carriers are sending is also about diversification. “They don’t want to have all their eggs in one basket so what we see happening in terms of the decline of other ports, is that much of it has come to the Port of New York and New Jersey,” he said.

“The Atlantic Ocean region volumes are high once again, as shippers continue to avoid the West Coast due to the uncertainty of the IWLU contract negotiations,” said Paul Brashier, vice president, drayage and intermodal at ITS Logistics.

The International Longshore and Warehouse Union and Pacific Maritime Association (which represents the terminals and ocean carriers) have been engaged in a labor dispute for much of this year.

New York first topped California in cargo volume in August.

While volume remains low on the West Coast, the elevated ocean dray on the East Coast started back in January, “when all of the smoke around IWLU started,” Brashier said. “And honestly, we can’t see these trends changing in 2023 until there’s a resolution on that contract,” he added.

East Coast ports making major investments

East Coast ports like Georgia, Virginia and Maryland have been increasing their investment to accommodate the increase in rail capacity. The Port of Virginia is currently deciding if it will open a second inland port. This long-term infrastructure investment is attracting ocean carriers like MSC that have announced plans to build new terminals at the ports of New Orleans and Baltimore.

“What is attracting the trade is the long-term investments the East Coast and Gulf ports are making to meet today’s trade demands,” said William Doyle, executive director for the Maryland Port Administration “Our mix of public-private partnerships have resulted in the investments of the Howard Street Tunnel, investments at our Seagirt Marine container terminal and Dundalk Marine Terminal (berths and on dock warehousing), and dredging. This is just the beginning.”

Private sector investment and state funding have also fueled port investment in Georgia. The Mason Mega Rail Terminal is a $220 million project for the Georgia Ports Authority. At 85 acres and 18 working tracks, the rail yard is now the largest of its kind for a port terminal in North America.

“The expanded infrastructure doubles the Port of Savannah’s previous rail capacity to 2 million twenty-foot equivalent container units per year, and allows Georgia Ports to better serve major inland markets such as Atlanta, Birmingham, Chicago, Memphis, Dallas, and New Orleans,” said a Georgia Ports Authority spokesperson.

The Port Authority of Virginia tells CNBC it does not see any lull in future investments.

“We move more than one-third of our total cargo volume by rail and with our investments, we believe we can push that number to somewhere near 40%,” said Stephen Edwards, CEO and executive director of the Virginia Port Authority. “We’re creating a superior rail operation – on-dock, double-stack and served by both of the East’s Class I carriers — that reaches deep into many of the Midwest’s traditional manufacturing and population centers.”

Edwards added they are also adding landside capacity and capability, channel depth, and see more private investment in Virginia by port users – logistics companies, warehouses, distribution centers, manufacturing, etc. Total investments in their rails, terminals, and widening and deepening of Norfolk Harbor is $1.4 billion.

Cotton also was confident that New York’s gains will be lasting, especially after five years of investments.

“If you compare today’s performance to prior years, it has absolutely stayed at an extraordinary level above the prior years. We are not seeing the decline the other ports are seeing,” he said. “The port will continue to set records for the rest of the year and we think that trend will continue. There may be seasonal declines, but the port is hitting on all cylinders.”