It’s likely to get worse

   It won’t take much trade growth in future years to exacerbate congestion at U.S. seaport gateway areas unless significant investments in freight movement capacity take place. 
   U.S. GDP is estimated to have grown 2.5 percent in 2014 with a much higher rate of growth in the second half (severe weather in the first quarter negatively impacted activity), while containerized imports appear to have grown 6.2 percent (based on data available through November 2014). U.S. GDP growth is expected to rise next year, while forecasts for the rest of the world indicate slightly higher growth than in 2014. Unless the U.S. dollar rises too much, overall U.S. container volumes are likely to grow faster in 2015. 
   Part of the concerns over congestion arise from a high concentration of container volumes in relatively few ports and on board fewer but larger vessels. The chart shows that U.S. container volumes at ports that handle international and domestic volumes have been concentrated at the 12 largest ports in the gateway regions. These ports have averaged 87 percent of the total volumes handled from 1980 to 2013. Data for 2014, available through November, indicates the larger ports’ volumes grew faster than those of smaller ports. When final results are in for 2014 it is likely that the 12 largest ports’ share will have increased from 2013.
   These same port areas have growing populations and, given the difficulties in developing greenfield infrastructure, it is unlikely the trend towards high concentration in major gateway regions will reverse. 
   Relatively profound but temporary issues such as labor contract negotiations and chassis pool management aside, there are extraordinary needs inside and outside ports and terminals. These investments and innovations are not keeping pace with growth and volume concentration. 
   Shippers have had to absorb higher costs and longer delivery times and may have to continue to do so. Without investment in “outside-the-gate” infrastructure, such as connecting rail, roadways, and grade separations, these costs can rise to the point that they either endanger a port gateway’s share of container volume trade or outright discourage it. This could happen without balanced capacity investment across the freight corridors which connect port gateways with the hinterland regions that they serve. Alternatively, Canada and Mexico may have to absorb additional volumes. 
   These problems are not unique to the United States. The world wants to trade as long as the cost doesn’t get out of hand. Right now it seems the way the structure of freight flows are set up around the world, we’ve got to face the possibility of potential cost increases, and this could negatively impact global trade.
   Slower world trade would not benefit the United States, but higher levels may bring new problems. Over the next five to 10 years, economists expect continued growth in U.S. exports. For the last few decades, the U.S. logistics industry got used to bringing containers full of goods imported from other countries, removing the goods from the containers and sending them back empty. U.S. exports are growing and have potential to continue to do so, including goods exported in containers. Repositioning empty containers from import destinations to export originations could become the big logistics challenge of the next decade. Even more investment in innovation and infrastructure, since exported goods tend to be different than imported ones, will be needed to handle that.
   Kemmsies is chief economist at Moffatt & Nichol, an infrastructure engineering firm. He can be reached at (212) 768-7454 or by email.

This column was published in the February 2015 issue of American Shipper.