Seroka said U.S. companies still face short-term supply chain planning challenges.<\/p>\n
\u201cImporters are making decisions quickly based on tariffs, costs. cost, and demand,\u201d said Seroka. \u201cFor now, purchase orders back in Asia remain solid, and our customers are moving that cargo when the opportunity is there. So, while November and December are a little bit hard to predict, we\u2019ve got solid momentum heading into the final stretch.\u201d<\/p>\n
Willy Shih, professor of management practice in Business Administration, Harvard Business School, added, \u201cCompanies are moving from purely optimizing for cost to optimizing for options. They are asking, \u2018 How do I create more optionality so I can move around?\u00a0 How do I hedge for tariffs or things like that with front-loading rather than maybe relocating? We saw that with all the front-loading over the last year and a half; supply chain diversification is happening, but it\u2019s growing much more slowly than people would like. That type of thing takes time.\u201d<\/p>\n
China accounts for about 40% of total cargo volume for the Port of Los Angeles and 60% for the Port of Long Beach.\u00a0<\/p>\n
The U.S.-China trade war has pushed China to diversify manufacturing across Southeast Asia. Both Noel Hacegaba, CEO of the Port of Long Beach, and Seroka use Vietnam as an example of this trade expansion. Both port heads expect another frontloading wave before the U.S.-China trade truce expires on January 10th.<\/p>\n
\u201cWhile China\u2019s share of our business at the port has dropped from 60 to 40%, we\u2019ve continued to grow, as that sourcing starts to really take effect in Southeast Asia,\u201d said Seroka. \u201cWhen I\u2019m in Hong Kong, Guangzhou, and Shanghai over the next 10 days, one thing I\u2019ll be checking is: what do these purchase orders look like? Is there a rate of cancellation, or are orders steady 90 to 120 days out?\u201d<\/p>\n
The upcoming El Nino season is also expected to divert more containers to the Port of Los Angeles as ocean carriers avoid the Panama Canal.\u00a0<\/p>\n
Seroka says they are preparing for another repeat of diversions.<\/p>\n
In 2024, during the last historic El Ni\u00f1o, the port moved 10.3 million TEUs, its second-best year in 117 years. Seroka said four key events drove those higher volumes: Red Sea diversions, drought-related capacity cuts at the Panama Canal, uncertainty over the East and Gulf Coast labor dispute, and tariff frontloading in late 2024.<\/p>\n
\u201cWe are seeing more containers shifting to Los Angeles away from the Panama Canal,\u201d said Seroka.\u00a0 \u201cAlso, a factor is the price of vessel fuel doubling over the last eight months because of the war in Iran and the four other conflicts in the Middle East; longer transits burn more fuel at higher prices. Those costs are passed on to importing and exporting companies. Shorter, quicker transits to get to market are the order of the day for many.\u201d<\/p>\n
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Ahead of the El Nino season, the canal authority began instituting draft restrictions in advance of the dry season. In an interview with gCaptain,<\/a> Ricaurte Vasquez said they anticipated the weather phenomenon to last longer and be more severe than the last historic El Nino.\u00a0<\/p>\n Seroka said he is already preparing for a repeated El Nino container surge. Expecting around a 5% uptick in cargo in containers moving to the ports of Los Angeles and Long Beach.\u201d<\/p>\n Seroka credits port stakeholders with handling high volumes and shifting global trade routes that are bringing more volume to Los Angeles. But he cautions that rising energy costs are affecting the local trucking community.\u00a0<\/p>\n \u201cDiesel is absolutely impacting trucking,\u201d Seroka told gCaptain. \u201cDiesel prices are up 62% since February 28th. More than half of the truckers registered to do business here are small businesspeople with five rigs or fewer. And this is not necessarily a price hike that can be passed on. If you\u2019re a small business competing with larger companies that can absorb some of this shock, that\u2019s a tough spot to be in.\u201d<\/p>\n
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