How US railroads would respond to West Coast dockworker lockout

Mark Szakonyi, January 14, 2015, JOC.com

The potential impact of a U.S. West Coast port lockout on intermodal service — should it come to that — varies by expert but analysts agree that the railroads will act fast and decisively if it does occur.

 

If waterfront employers lock out longshoremen — a rising concern as contract talks between Pacific Maritime Association and International Longshore Warehouse Union keep plumbing greater depths of acrimony — BNSF Railway and Union Pacific Railroad would immediately place an embargo on accepting ocean containers, intermodal analysts told JOC.com this week. The two major U.S. Western railroads would also place an embargo on interchanging ocean container terminals from the two major U.S. Eastern railroads, CSX Transportation and Norfolk Southern Railway. BNSF last week imposed such an embargo on westbound ocean — only to lift the ban two day later, saying intermodal freight movement had “become more manageable.”

 

While the ways the railroads would respond to a lockout is pretty clear, the impact is less so. Larry Gross, a senior consultant at FTR Associates, thinks a lockout would likely wipe away many, if not all, of the service improvements the railroad industry has made in recent months. Domestic intermodal equipment would start piling up in southern California as transloaders wouldn’t be able to stuff the contents of ocean containers into the 53-foot containers, because no ocean containers would be moving through the ports. The lockout would “put everything out of whack,” as the railroads are loath to move empty domestic containers eastbound just to position them for westbound moves out of the Midwest.

 

“UP and BNSF would have to put an embargo (on marine containers),” Gross told JOC.com. “There is no other choice. You would have a fire hose putting water into the pool and if there is no outlet to the pool, it’s going to overflow.”

 

Shippers that transload their imports from marine containers to domestic equipment would have fewer options to divert shipments away from U.S. West Coast ports than the liners’ moving ocean containers inland would have, said Ron Sucik, principal at RSE Consulting. Shippers that depend on transloading in the San Pedro Bay “would have to stick with their plan and wait it out.”

 

Ted Prince, a veteran intermodal analyst and chief operating officer at Tiger Cool Express, a refrigerated intermodal provider, doesn’t think a West Coast port lockout means the railroads would necessarily lose all their service improvements, largely because carriers have taken steps to separate their international and domestic intermodal operations.

 

“They’ve all become separate networks,” said Prince, who added that the strategy will allow BNSF and UP to keep their domestic intermodal service humming even if they are no longer moving ocean containers.

 

If a lockout occurs, he doesn’t expect a huge diversion of freight to Port Metro Vancouver and Prince Rupert, as each port has limited additional capacity to handle an influx of U.S.-bound cargo. Plus, moving U.S.-bound rail shipments through Canada is an onerous process requiring more paperwork and involving additional customs hurdles.

 

UP and BNSF would issue equipment allocations to customers only when longshore workers return to work, so they wouldn’t be hit with an influx of volume on restarted international intermodal service. It took the rail industry a couple of weeks to restore service after the 10-day U.S. West Coast lockout in 2002, but it took marine terminals months before they were able to bring operations back to normal, Prince said.

 

Although BNSF didn’t detail how it would respond to a port lockout, spokesman Amy Casas said the railroad is working with shippers and marine terminals “to keep resources and freight moving” and letting them know when conditions change. UP didn’t respond to a request for comment from JOC.com.

 

In the case of a lockout, Norfolk Southern Railway would embargo traffic heading to BNSF and UP as it did in 2002, NS spokesman Robin Chapman said. NS said it received additional freight that was diverted away from the U.S. West Coast following the lockout but wasn’t able to quantify the scale of the shift. Like NS, CSX gained some international intermodal freight from short-term diversions in 2002 and from shippers’ long-term re-routing of more of their freight to East Coast ports after being burned by routing too much of their freight through the West Coast.

 

“The flexibility of the CSX intermodal network allows us to be able to provide alternate solutions for customers looking to divert freight around the West Coast, and we are prepared to handle that migration if it occurs,” CSX spokesman Melanie Cost said.

 

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