Creating Resilience

North American Cargo Volumes Continue to Normalize

Port Watch Series Q3 2023

December 13, 2023 7 Minute Read

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Container levels remained low through summer
Third quarter cargo container volume at the 14 major North American ports tracked by CBRE declined by 10.7% year-over-year after reaching record highs in 2022. The drop was more notable at East Coast ports (down 15.2%) than at West Coast ports (down 7.8%). Total Twenty-Foot Equivalent Units (TEUs) fell by 13.7% year-over-year through the first nine months of the year.

West Coast ports reach labor deal
The International Longshore and Warehouse Union (ILWU) agreed to a six-year contract for West Coast port workers. This agreement includes a 32% pay increase over the contract’s term and a one-time bonus for working through the early portion of the pandemic. The contract expires July 1, 2028. East and Gulf Coast port workers’ six-year contract expires September 30, 2024.

Environmental impacts on port activity
This year, the Panama Canal has suffered from its worst drought in more than 70 years, due to the El Niño phenomenon. Approximately 40% of all U.S. container traffic typically flows through the Panama Canal. Extremely low water levels decreased vessel traffic from 36 ships per day to 25 currently and 18 ships expected by February. As a result, shippers are aiming to lighten their cargo weight and/or consider alternative, longer routes.

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Q3 Cargo Container Volumes

  • Only two of the 14 ports tracked by CBRE had positive Q3 year-over-year growth in total TEU volume: Manzanillo (13.7%) and Lazaro Cardenas (0.6%). These Mexican ports have benefitted from several companies’ nearshoring of manufacturing operations.
  • The Lazaro Cardenas port also recorded the largest year-over-year increase during Q3, reporting a 38.2% loaded inbound TEU volume increase.
  • Container volume is returning to pre-pandemic levels at most major ports, after last year’s record highs, as producers increased inventory to meet strong consumer demand.

Figure 1: Q3 TEU Volume Comparisons

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Source: Various Port Authorities, CBRE Research, Q3 2023.

U.S. Seaport, Inland Port & Non-Port Market Fundamentals

  • Industrial vacancy rates increased by 60 basis points (bps) quarter-over-quarter for both seaport and inland port markets to 4.1% and 5.2%, respectively. Non-port markets increased by 70 bps to 4.4%.
  • Seaport markets with the lowest vacancy rates: Los Angeles (1.8%), Charleston (2.9%), Ft. Lauderdale (3.1%) and Portland (3.2%).
  • Non-port markets had the highest year-to-date net absorption, totaling 85.5 million sq. ft., led by Central Pennsylvania (11.5 million sq. ft.), Phoenix (10.5 million sq. ft.) and Indianapolis (10.3 million sq. ft.).
Source: CBRE Research, Q3 2023.

SPOTLIGHT: Port of Houston

  • The Port of Houston is the largest Gulf Coast inland port in the U.S., handling 70% of Gulf Coast container traffic.
  • The port ranks first in the U.S. for foreign waterborne tonnage (220.5 million short tons as of 2022) and provides nearly 1.5 million jobs in Texas and 3.3 million jobs nationwide.
  • Imports through the Port of Houston mainly originate from Mainland China, Germany, South Korea, Mexico and India. Top geographies for exported goods include Mexico, Mainland China, Netherlands, Japan and India.
  • Fifty-nine percent of all resin (PE, PVC, PP) exported from the U.S. comes through Houston. Globally, primary export regions include China, Brazil and Belgium.
  • The port’s real estate portfolio consists of over 3,500 acres of developed properties and more than 4,200 acres of undeveloped property opportunities.

History
The Port of Houston was founded as an alternative to the Port of Galveston. The Port of Galveston, about 48 miles southeast of Houston, was the region’s main port at the turn of the 20th century and a key transit hub for the export of cotton. In 1900, a major hurricane damaged its railroad connection, providing the impetus for developing the Port of Houston. The Port of Houston was officially opened in November 1914 and today is a key element of the region’s strong supply chain.

Sustainability
In 2021, the Port’s commissioners established a program called ES²G, to support a more stable, safe and sustainable future. Under this initiative, the Houston Ship Channel is being widened by 170 feet, to 700 total feet. This project, scheduled to complete by 2025, is named Project 11. Additionally, some of the channel’s upstream segments will be deepened to 46.5 feet and undergo other environmental upgrades and efficiencies. The port will be able to accommodate more and bigger ships, greatly reducing emissions from vessel wait times.

Looking Ahead
The port reported 2.8 million TEUs serviced from Q1 through Q3. This is projected to reach around 3.8 million by year-end. The port has initiated a $1.4 billion five-year capital enhancements program called the 2040 Plan. Its focus is growth through channel expansion and operational improvement, applying new technologies to create value, sustainability and resilience, and strategic community partnerships.

Port Fact

The Port of Houston intends to grow its fleet of rubber tire gantry (RTG) cranes to maintain terminal adaptability. The port currently has 116 Konecranes and 26 are hybrid-electric. The hybrid RTG fleet will expand to 57 by 2025 and support the port’s long-term developments.

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North America Seaport Cargo Statistics, Q3 2023

Figure 2: TEU Container Activity, Q3 2023

Source: Various Port Authorities, CBRE Research, Q3 2023.

North America Seaport Cargo Statistics, January–September 2023

Figure 3: TEU Container Activity, January–September 2023

Source: Various Port Authorities, CBRE Research, Q3 2023.

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