65 percent of shippers in JOC survey say they’ll divert from West Coast

Mark Szakonyi, February 25, 2015, JOC.com

 

The last two months of U.S. West Coast congestion appear to have cemented many shippers’ plans to divert cargo to other ports, according to a recent JOC.com survey.

 

Sixty-five percent of 138 shippers surveyed this week said they plan to ship less cargo through U.S. West Coast ports this year and in 2016 after suffering from congestion delays. The percentage of shippers planning to  permanently reroute some cargo away from the coast is nearly identical to the 66 percent of shippers who said the same thing when they were surveyed by JOC.com in mid-December.

 

“I challenge if things will really return to normal. Chassis, larger vessels, (International Longshore and Warehouse Union) inflexibility will continue to plague the ports and create port terminal congestion,” said one shipper executive who asked to remain anonymous.

 

But even after seeing shipments delayed for weeks, some say they have no choice but to move their freight through West Coast ports.

 

“The only reason I’m not rerouting cargo is because I’m an agricultural shipper,” one exporter said. “I can’t move my hazelnut orchards or grass seed fields. We are stuck with the West Coast ports — for better or worse.”

 

The survey is another sign that the West Coast port congestion — exacerbated by alleged ILWU slowdowns that waterfront employers said only ended after they reached a tentative labor agreement with the union on Feb. 20 — could cause a noticeable shift of cargo away from the coast like the one following 2002 disruptions.

 

At that time, the West Coast employers’ decision to lock out ILWU workers for 10 days spurred shippers to permanently shift imports to the East and Gulf coasts. Congestion “will happen again to the (West Coast) ports. Obviously, we did not learn anything from the 2002 lockout,” another shipper said.

 

The ILWU has denied that it engaged in slowdown tactics, blaming, instead, chassis dislocation, terminals’ inability to handle larger vessels and other factors controlled by employers, particularly carriers who they blame for bringing in big ships and withdrawing from chassis ownership,  which by themselves helped bring on the congestion seen since last fall.

 

U.S. East Coast ports are poised to be the biggest beneficiaries of the surveyed shippers’ frustration with West Coast congestion, as 38.8 percent of those planning to reroute cargo say they will send the freight to the opposing coast. Nearly 23 percent of the shippers planning to reroute cargo said the majority of their freight would head to U.S. Southeast ports, which have experienced virtually no congestion over the past year, while 16.1 percent tapped U.S. Northeast ports as their major load centers for diverted cargo. Of those shippers planning to reroute cargo, 16 percent said they would move the majority through U.S. Gulf Coast ports. Roughly a quarter of surveyed shippers who said they would shift cargo didn’t answer which other ports they would use, nor did they choose the “not sure” option within the survey.

 

Slightly less than 15 percent of shippers planning to reroute cargo from the U.S. West Coast said they would shift the majority of their cargo to British Columbia’s Port Metro Vancouver and the port of Prince Rupert. That’s a signficant decline from the 28 percent of shippers that told JOC.com in December that they would move most of their goods through the western Canadian ports.

 

Port congestion will spur more shippers to source products closer to the United States or within the country itself, as they face a “cycle” of potential disruptions from the ILWU; the International Longshoremen’s Association, which covers Gulf and East Coast ports; and other unions, said Steve Wolfe, vice president of global supply chain and logistics at Stanley Furniture Co.

 

“Not only is it getting old, it’s more and more disruptive and raising costs to the point that bringing manufacturing back may end up being break-even, though it’s probably commodity specific,” he said in his survey response. “Our company is certainly beginning to look for alternatives as well as many of my peers in various commodity segments.”

 

The majority of surveyed shippers placed the blame of West Coast delays on the ILWU, with nearly 62 percent of executives saying the union was solely at fault. Only 2.2 percent of surveyed shippers said the Pacific Maritime Association, which represents West Coast employers, was to blame. Roughly one-third of surveyed shippers put the blame for delays on the shoulders of both the PMA and ILWU.

 

“I generally support unions, and I appreciate what they have meant to the development of fair labor practices in the U.S.,” said one shipper executive who asked to remain anonymous. “However, I resent the fact they (or he) held the country’s economy hostage for as long as he did. When most people are still trying to recover from the 2008 financial meltdown, this was a display of outright selfishness.”

 

But those that did blame the PMA for the standoff were particularly strident in their defense of the ILWU. One shipper executive, who fingered anti-union rhetoric expressed by the media as partly to blame, said delays at the Los Angeles-Long Beach port complex were occurring before the slowdowns. The importer added that container lines “will do everything possible to squeeze more money any way they can, however, trivial,” via demurrage and detention fees, and other methods.

 

“They are not to be trusted, and I am astounded at the bias in the media,” the shipper said.

 

In additional comments, some shippers blamed the Obama administration for not stepping in sooner and the national media taking too long to shine  light on port delays.

 

“Shippers pay for this, and we’re tired of getting a bill for inept performance at best from both parties involved in this negotiation,” one shipper said.

 

There were already diversions by importers under way last year, especially in the fourth quarter when the West Coast congestion was at its worst. Fourth-quarter import growth was 12.6 percent on the East Coast, 11.8 percent on the Gulf Coast and 5.3 percent on the West Coast, compared to the fourth quarter of 2013. The data is from PIERS, a sister product of JOC.com within IHS.

 

That dropped the West Coast’s share of imports slightly from 54.57 to 54.04 percent, and increased the East Coast’s share of imports from 39.32 percent to 39.85 percent, and the Gulf Coast’s share from 6.11 to 6.12 percent, according to PIERS.

 

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