Wolfe sees shift to West Coast ports on pricing gap

Investing.com -- Wolfe Research expects U.S. import volumes to shift from East Coast ports to West Coast ports as the pricing gap between the two routes widens significantly.

The spread between Shanghai-East Coast and Shanghai-West Coast ocean rates is approaching $3,000 per container, marking the largest gap since the COVID pandemic and well above historical averages of around $1,000, according to the research firm.

Wolfe attributes the pricing difference to several factors including typhoons and congestion at major Asian ports, an increase in blank sailings to East Coast ports, and ongoing supply chain disruptions related to the Mideast war.

The Panama Canal plans to reduce transits by 4 per day, representing an 11% cut, in mid-September due to low rainfall. Wolfe said this reduction could further support the shift toward West Coast ports.

The research firm identified Union Pacific (NYSE: UNP), J.B. Hunt Transport Services (NASDAQ: JBHT), CSX Corporation (NASDAQ: CSX), and Norfolk Southern (NYSE: NSC) as potential beneficiaries of increased volumes through West Coast ports. Wolfe noted that eastern railroads favor more West Coast port volumes due to longer haul distances when picking up freight in cities like Chicago and Kansas City.

Freight forwarders Expeditors International (NASDAQ: EXPD) and C.H. Robinson Worldwide (NASDAQ: CHRW) could benefit from shifting supply chains and higher ocean rates, Wolfe said. The firm also views the current environment as supportive for Matson (NYSE: MATX) and Maersk.

For J.B. Hunt, Wolfe categorizes domestic intermodal volumes into Local East and Transcon segments. The company's Local East volumes increased 16% year-over-year and 31% over two years in the second quarter, while Transcon volumes rose 5% year-over-year and 4% over two years.

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