Seroka Working To Stem Tide Of Market Share Loss

The always cool and collected Gene Seroka nearly got fired up when talking about Southern California ports' loss of market share during a press conference on cargo volumes.

Seroka, executive director of the Port of Los Angeles, gave a more than three-minute response when asked Wednesday about what steps he was taking to stop the flow of business to the East and Gulf coasts and a letter 52 organizations sent to California Gov. Gavin Newsom earlier this week urging him to take action to reverse the state's ports' receding market share. 

"I've been talking about this since nearly day one when I stepped into this job. It is not an overnight revelation. And while it's great to see a number of folks trying to back us, this is work that we've been talking about for some time," Seroka said. "Since the unfortunate labor lockout of 2002, we have lost 20% of our market share here in Southern California at the ports in the San Pedro Bay complex — fact."

He took aim at the way money collected through the harbor maintenance tax is distributed. The United States charges shippers the tax on the value of their cargo entering the nation's ports. 

"As we have seen through the Harbor Maintenance Trust Fund's antiquated look at how investment takes place, we've been collecting the lion's share of this tax and investing it in our competitors' ports on the East and Gulf coasts as well as our river facilities," Seroka said. "East and Gulf Coast ports have received 10 times the federal funding that has been received by West Coast ports over the last decade — $10 billion to $1 billion here on the West Coast. That has got to change if we are going to be more competitive."

He said "very, very heavy" environmental mandates in California also have driven away some business.

"I am not — and I will underscore this — not advocating that we roll back on the great environmental strides that we have made thus far since 2006, but what I am sharing is this is a high-wire act to balance jobs creation, commercial interests and what's in our DNA to be a leading proponent of environmental change worldwide," Seroka said.

Regardless of the cause, market share — and jobs — have been lost, he said.

"Had we simply kept up with U.S. market growth at the GDP level, on average we'd be talking about 200,000 new jobs right here associated with the port complex in Southern California. That's not the case," Seroka said.

He gave a nearly two-minute answer when asked about sourcing moving from China to Southeast Asia and thus giving U.S. East Coast ports a logistics advantage.

"I have stated that in addition to the market share loss that we have faced since 2002, we will again lose another 15% of our import market share permanently based on the trade policies out of Washington. It takes seven Vietnams to make up for China. For every new container we earn from Southeast Asia, we lose three from China. It is easier to move cargo from Southeast Asia westbound via the Suez Canal to ports on the East and Gulf Coasts that are less expensive and less regulated. But I'm not going to cry about all this. If this is the rule set that we must deal with, we are going to," Seroka said.

Chasing containers

"I a long time ago announced a goal that I wanted to get to 10 million TEUs here at the Port of Los Angeles, and while we will scrape and chase every import container, I think our real opportunities lie in the export markets," he continued. "If we would better balance our trade compared to what historically we have been known for, I think we can reduce our cost to serve, which may make us, if I'm right, a more attractive trade gateway for the logistics decision-maker."

Export volumes have not been good at the Port of LA this year. When reporting June and six-month volumes early in Wednesday's video press conference, Seroka said, "Exports continue to take a beating, down 21% in the month of June and year to date down nearly 18%."

The total number of twenty-foot equivalent units (TEUs) moved in the first six months of 2020 was down 17.1% from the same period last year — from 4,538,639 to 3,761,889. In June, the Port of LA moved 691,475 TEUs, down 9.6% from the 764,777 TEUs in June 2019.

Imports in June were down 6.8% year-over-year, from 396,307 TEUs in 2019 to 369,189 TEUs this year. For the first half of the year, imports were down 13.7% year-over-year.

"A very important indicator for us is the movement and repositioning of empty containers," Seroka said. "Compared to a 22% decline year to date, we were off only 7 percentage points in the month of June, meaning we're starting to see the evacuation of empties to prepare for a modest uptick in imports in the months to come." 

He said volumes of scrap metal and steel "continue to be hampered by the tariff policy." Steel tonnage in the first half of the year was down 43.6% compared to the same period in 2019.

"I commented last month that our automobile sector would soon turn negative and it did," Seroka said, reporting the vehicle business was down 9.3% from 58,381 units moved January through June 2019 to 48,401 units in the same period this year.

"Less cargo means fewer jobs here at America's port and we're watching this very closely," he said. "Year to date our labor shift work for our longshore groups is down 18% compared to the same period in 2019." 

Wreaking havoc

Seroka said the Port of LA had experienced steady increases in cargo volume since he came on board in 2014. And then came a steady stream of misfortune. 

"We began to see the trade policy out of Washington impact us in the latter part of 2018 and full year '19 and now the double hit of the pandemic and the trade policy is in clear focus with levels of cargo volume not seen since the Great Recession," he said. "For the balance of year 2020, we show that we'll be at levels at or below those witnessed during the Great Recession a decade ago, and please remember it took us nearly 10 years to make up the cargo volume off the heels of the recession. We will not wait that long this time. 

"The trade war and COVID-19 have wreaked havoc on global trade worldwide, including here at the nation's largest trade gateway, and we do expect 2020 volumes to come in below 8 million TEUs and, if accurate, that will equate to about a 15% drop in cargo volume compared to 2019," Seroka said.

Returning to the loss of market share, Seroka addressed the Harbor Trucking Association's criticism of a traffic mitigation fee increase taking effect Aug. 1.

"What we hear directly from the cargo owners is that all of these fees add up and assist them in deciding to move cargo through a four-corners strategy or port diversification programs. And there's no secret here this has been a polarizing conversation," he said.

Seroka said he has formed a West Coast competitiveness team "to dissect every cost … to find efficiencies in everything that we do and model round-trip and triangulated economics, make the value proposition that much stronger for the cargo owner to decide that this is the gateway of choice. But I will profess to you we have much more work to do."

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Click for more FreightWaves/American Shipper articles by Kim Link-Wills.

Photo: Port of LA