Congestion to cost West Coast ports peak-season cargo share

Bill Mongelluzzo, April 29, 2015,


West Coast ports will miss some of the gains in what is expected to be a relatively strong peak shipping season in 2015, but the ports should recoup much of their lost market share next year and beyond if they address their congestion and labor problems, speakers at the Port of Long Beach Pulse of the Ports breakfast said Wednesday.


“I believe a lot of the cargo is coming back,” said Allen Clifford, executive vice president of Mediterranean Shipping Co. He noted that this past year’s port congestion on the West Coast is a problem that other large ports must also contend with. The word from New York-New Jersey Wednesday morning was that a New Jersey Turnpike exit was shut down because trucks waiting to get into the port had backed up to highway, he said.


Economists are projecting relatively strong U.S. imports during the summer-fall peak season. Walter Kemmsies, chief economist at Moffatt & Nichol, said that U.S. gross domestic product growth should be about 2.9 percent in 2015, and peak-season imports will be about 6 to 8 percent greater than during peak season 2014.


West Coast ports will be challenged, however, to achieve that level of import growth in 2015. The ports took a big hit in the first two months of the year as cargo was diverted to the East Coast and Canada due to congestion that was magnified by labor disputes involved in the coastwide contract negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association.


To make matters worse, Alphaliner this week reported that trans-Pacific carriers this summer will introduce six new all-water services from Asia to the East Coast. Clifford said carriers are responding to issues that are present right now — lingering port congestion on the West Coast and strong shipper interest in East Coast services. “Carriers are going at the moment where the cargo is,” he said.


Strip away the labor problems of 2014-15, though, and West Coast ports face the same supply chain challenges that all U.S. ports must contend with. Those include inadequate transportation infrastructure, the inability of marine terminals to handle the cargo surges generated by today’s big ships and logistical complexities caused by vessel-sharing alliances. Other challenges are a shortage of truck capacity, intermodal equipment dislocations and a transportation community that is horribly siloed because the individual sectors do not communicate with each other.


Nobody feels this pain more so than exporters in the nation’s interior. “The interior is a nightmare,” said Donna Lemm, vice president of global sales at Mallory Alexander International Logistics. Exporters in the heartland experience a shortage of containers, chassis, intermodal rail equipment and truck capacity. Some ocean carriers limit their export bookings because of capacity issues, or they “roll” export shipments to  subsequent voyages.


During the height of the port congestion problems from December through February, shipments that did make it to the West Coast faced as much as a 40-day delay. “We can’t run a business that way,” Lemm said, adding that some carriers do not even inform their customers when their shipments are being rolled.


Clifford agreed that carriers must improve their lines of communication. “We try not to roll you, and if we do, we will inform you. If we fail to do so, it’s very rude,” he said.


Transportation service providers agreed that their industries must and are adding rail and truck capacity from the interior to the ports, as well as truck drivers. At the end of the day, however, capital investments are constrained by inadequate freight rates, they said. “A $300 rate on a 40-foot shipment of hay to Japan won’t cut it for ocean carriers,” Clifford said.


The trucking industry faces an on-going loss of drivers because low freight rates are depressing wages and forcing drivers to look for better-paying jobs in other industries, said David Duncan, chief operating officer and owner of Duncan and Son Lines.


Duncan said his company has increased wages, and rewards drivers with a $1,200 “loyalty bonus” at the end of the year, but it can only maintain these programs if freight rates go up. Duncan said he is getting a positive response from customers on the need for higher freight rates.


Port of Long Beach Chief Executive Jon Slangerup said the San Pedro Bay ports are doing their part to improve cargo velocity and reduce congestion by promoting innovative solutions such as dray-offs of imported containers to free up space at the marine terminals and a free-flow initiative in which containers for pre-certified truckers and cargo interests are block-stowed at the terminals. Containers are peeled off from the top of the pile when the truckers arrive at the facility.


These initiatives require near-dock land for the temporary storage and processing of containers, and Long Beach has identified about 200 acres within its harbor area so  dray-offs and free-flow initiatives can be expanded, he said.


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