The COVID-19 pandemic has had as large of an effect on railroads as the Great Recession of 2008 an industry observer told Railway Age during a panel discussion.
Jason H. Seidl, a managing director of Wall Street firm Cowen and Company, said permanent changes in trade flows will likely cause the Port of Los Angeles to permanently lose about 15 percent of its market share to Gulf and East Coast ports.
He said that is a setback for western railroads but a gain for CSX, Kansas City Southern and Norfolk Southern.
Seidl noted that freight volumes moving through ports have been down with the Port of LA down 17 percent through June.
Imports began picking up in July, and August and September are expected to be better than earlier forecasts but still post increases in the single digit range.
However, Seidl said the Port of Houston has seen a stronger July than usual.
“When COVID-19 hit China early in the year, it caused lower exports out of China,” he said. “Ocean carriers took steps to lessen the numbers of sailings. Per the Port of Los Angeles, there were 40 canceled sailings of ships, or roughly 25 percent of the total number of ships.”
During the second quarter of this year about 15 percent of sailings were canceled to the Port of LA. The Port of Houston saw 14 canceled sailings.
Seidl said that the outlook for the peak shipping season this year is mixed and unclear.
Los Angeles port officials said it took 10 years to recover from the 2008 recession when volume declined more than 30 percent.
This year the Port of LA has seen 14 consecutive months of export declines as it bore the brunt of the trade war between the United States and China. Officials there do not expect a traditional peak season.
The Port of Houston, though said its customers are expecting a peak, although it is unclear if that will flow from increased demand or increased need to replenish inventory.
Although the back to school shopping season traditionally has boosted retail sales, this year there is weaker consumer demand, supply chain disruptions, apparel markdowns and lack of newness coming into play.