The Challenge: Trade Wars and a Global Pandemic

Fiscal year 2020 posed a host of challenges to us: a tariff-driven trade war with our largest trading partner, the traditional slowing of trade during the Chinese New Year and the onset of the COVID-19 pandemic.

Maintaining continuity in our operations, recovering lost volume, moving forward on critical infrastructure projects and ensuring a safe work environment for the port team and its labor partners, when combined, are a formidable obstacle. And, we must execute our mission while providing safe, reliable, and efficient service to our customers.

Each year, an internal team practices for a black swan event, those once-in-a-lifetime catastrophes that we hope never happen, but must be planned for. And while “pandemic” was not on our list of possible events, our practice and preparation for other, similar situations gave us a roadmap for successful operation in the moment.
Going into the first half of FY20 (which began July 1, 2019), the challenges were clear, and primary among them was the U.S.-China trade war that fueled significant tariff increases on specific Chinese imports and American-made exports to China. The biggest impact felt in the Norfolk Harbor was a drop in the soybean exports that move across our port. In addition to the tariffs, a strong dollar increased the cost of American-made goods overseas and further complicated the export picture.
Still, we maintained our volumes in the first-half of FY20: our TEU volume (twenty-foot equivalent units) was flat at 1.48 million units; rail volume was 265,200 units, down 5 percent; barge volume was 31,300 units, up 21 percent; and truck volume was flat at 530,500 moves.

In January, China and the U.S. agreed to reduce the tariffs on soybeans and pork, and the trade outlook improved. The traditional slowing of trade that accompanies Chinese New Year would be the last hurdle to cross before things begin to return to normal. But as the pandemic began to take hold, normal was never restored and the slowdown worsened.

Our volume in the second half of FY20 plunged, with monthly volumes in negative territory January through June. By the time the second half of the fiscal year closed June 30, our volumes were off more than 6 percent. During the second half of FY20, there were nearly 60 regularly-scheduled vessels that never came to Virginia because the ship owner did not have enough cargo orders to fill the ship. When the ships don’t come, no imports arrive, but no exports leave.
When the virus began spreading across the United States and shuttering businesses, we fell back on our training and planning, and quickly began focusing on those things within our control. Our first step was a robust internal and external communications effort to ensure that the port team, our customers and the cargo owners understood what our plan for operation during the pandemic looked like. In parallel, we put an emphasis on the health and well-being of our team, learning to operate and collaborate while working remotely and making sure that we are ready for recovery.
With the plan in-hand, port team and its labor partners went to work. Those who could work from home did so, and those needed on the terminals reported for work every day, without hesitation. The cargo flowing across the terminals moved with speed, predictability, and safety. The motor-carriers moved through the gates with efficiency; our double-stack rail service to many critical manufacturing a population centers in the nation’s Heartland was uninterrupted; and we set records for the amount of cargo moved by barge, up nearly 9 percent; and the overall cargo volume at Richmond Marine Terminal was up more than 22 percent.
The loss in volume, while significant, is temporary. Our training, tactical planning and long-term, strategic thinking allowed us to succeed and meet adversity head-on. We understand there will be other challenges and as a result of what happened in the second half of FY20, we will be better prepared for the next black swan event.