The Port of Los Angeles expects cargo volumes to dip in the coming fiscal year due to the fall-off from last year’s front loading of containers and the potential impact of new tariffs.
The slowdown underscores the growth slowdown that intermodal rail and trucking face in 2019 after last year’s big rush of freight from China. For the busiest port in the U.S., it plans “aggressive” marketing to attract discretionary cargo through its gateway amid lower volumes overall.
For the coming fiscal year, the Port of Los Angeles expects cargo volumes to reach 9.4 million twenty-foot equivalent units (TEUs) for the fiscal year ending June 30, 2020. The forecast amount would be a dip from the 9.533 million TEU the port expects to handle during the current fiscal year, which was a 4 percent jump from the previous fiscal year.
Still, container volumes could surprise to the upside. Los Angeles had expected to handle only 9.243 million TEU through the current fiscal year.
Port spokesperson Phillip Sanfield said the forecast is based on best estimates gleaned from discussions with shippers, ocean carriers and terminal operators.
“It’s certainly an art and not a science,” Sanfield said. “At the end of the day, it’s obviously just that: it’s a forecast
Marla Bleavins, the port’s chief financial officer, said at a presentation on the upcoming budget that the 4 percent cargo growth for the current fiscal year is “because people have been front loading” due to tariffs.
But the front-loading also sets up tougher comparables for the coming fiscal year. And the latest episode in the U.S.-China trade war also means shippers will tap the brakes until tariff costs or new sources can be assessed.
“The current trade outlook does generate a tremendous amount of uncertainty,” Bleavins said.
The result is that the Port of Los Angeles expects shipping services revenue of $409 million for the coming fiscal year, or just over $43 per TEU moved.
Shipping services revenue came in at $423 million last year, or just over $44 per TEU moved.
Overall, net income for the port is expected to drop 56 percent to $27 million.
After capital spending of $144.4 million in the coming fiscal year, the port might see slightly negative cash flow. But Bleavins said it is “highly unlikely we will spend all” of the capital budget.
“We don’t expect to go negative, but it is a conservative forecast,” Bleavins said. The port, which has an investment grade credit rating, plans to issue $204 million in new debt to refinance existing debt.
Executive Director Gene Seroka sought to reassure members of the port’s board about further slowing. Calendar year-to-date, the port’s total container volumes are up 4.5 percent. Most of the growth is in empty container handling with those volumes up 20 percent this year, but import volumes are still up 1.6 percent.