Gene Seroka, Port of Los Angeles Executive Director joins the Yahoo Finance Live panel to discuss the impact of COVID on the shipping industry.
GENE SEROKA: There's a lot of activity, and the strength of the US consumer continues greater than we've ever seen before. The imports for the month were at an all-time record of more than 535,000 container units. And we see the back half of the year equally as strong. We're going to be coming up on back to school season, fall fashion, as well as year-end holidays. What remains to be seen, though, is how the American consumer pivots from buying these retail goods, as we have for the last 11 months, to getting back into the service sector.
AKIKO FUJITA: Gene, I know when we spoke at the height of the pandemic, you were talking about a significant backlog, especially with the delays in China. We're getting these reports out of Southern China again around concerns around COVID infection spikes, that leading to delays in places like Shenzhen. How has that affected the Port of LA? You've got a lot of exposure to China. Are you anticipating delays on the back of that?
GENE SEROKA: Yeah, nothing's happening just yet, but let's put this in perspective, Akiko-- and, again, good to see you. First, that we have chipped away at the backlog of vessels sitting at anchor and reduced that inventory by 75%. So today, we have 12 ships at anchor off a high of more than 40.
And we've got 10 of those ships coming into Los Angeles. So we're getting to the point where I'm starting to feel like the end of June, as I predicted back in February, we would have few to probably, if any, container ships sitting at anchor. Second, about one-third of our cargo is coming in from South China today.
So we're watching very closely with the Pearl River Delta ports-- Yantian and others-- as to how they are grappling with a second wave, or even a third wave now, of the coronavirus and what it's doing to the workforce. All of our intelligence, and I was on the phone late last night with some colleagues and friends back in China-- I had lived there for a number of years, as you know-- and what we're seeing is that about 50% of normal productivity is taking place.
Some of the liner shipping companies are omitting those South China ports. There is some cargo that's moving cross-border into Hong Kong. Hong Kong's five terminals are really full right now. So we'll continue to monitor this and stay in contact with our colleagues there.
AKIKO FUJITA: What does that mean, though? You're looking at the intelligence coming out of China-- clearly, haven't see the impact yet. But if you look at the timeline you just pointed to where things slowly start to get back to what appears to be more normal at the Port of LA this month, are we going to see that timeline pushed even further, given the knock-on effect from China?
GENE SEROKA: Yeah, it's a good question, and I don't think we have an answer to that yet. But what we'll probably see is a little bit of a lull if they're working at 50% of capacity. And then when folks get back healthy and on the job, we'll see the business pick up a little bit. But at a third, and with the information system, the port optimizer that we have, being able to see three weeks out with some precision, we'll be able to manage this.
JARED BLIKRE: Gene, I want to ask you about the cruise lines, because we've seen bookings getting ramped up here, we're seeing Wall Street rate these firms higher. You operate the World Cruise Center, so I'm just wondering what you're seeing from your level.
GENE SEROKA: Yeah, Jared, it's still a lot of uncertainty. We're hopeful that hopefully by the end of the summer, we'll start to see cruising pick up again. But with two cases of COVID-19 over the weekend reported on some early sailings, we're taking a very cautious approach and working with leadership in the industry as well as others on the ground here with the Los Angeles County Department of Public Health and other experts to make sure that we do it right.
AKIKO FUJITA: And, Gene, looking ahead-- you know, you sort of broke it down in terms of sectors that you're watching, things that could be potential catalysts for picking up-- picked up traffic over at the Port of LA-- you said back to school, a lot of those supplies coming in as well. What does the outlook look like for you in the second half right now when you compare it to where levels were in 2020?
GENE SEROKA: Yeah, the outlook looks strong, but please remember the second half of 2020 is where we really took off. And cargo volume basically doubled from the first half of the year when we reached into the depths and started looking at what the coronavirus and COVID-19 would impact on the retail and international shipping sites. So I think the second half of 2021 is going to remain strong.
Again, what we're watching is how all of us re-enter the service sector. California's orders to open up the state just took effect yesterday. Watching the Dodgers play the Phillies last night, it was amazing to see Dodger Stadium at near capacity. So many of us are going to start traveling again-- we'll go out to restaurants, and ballgames, the movies-- not going to happen overnight.
But we're going to watch how that discretionary spend of the American consumer starts to shift over to the service sector. And our best estimate right now is we'll see a leveling of this strong import volume Q1 of 2022.
AKIKO FUJITA: Well, Gene, I will tell you as a lifelong Dodger fan, it's nice to see Dodger Stadium filled again, as well as stadiums across the country-- things slowly getting back to normal. Always good to talk to you, Gene Seroka, Port of LA Executive Director.