Bill Mongelluzzo, February 19, 2015, JOC.com
With West Coast ports reporting plunges in container volumes in January, port executives are becoming increasingly vocal in demanding that the International Longshore and Warehouse Union and the Pacific Maritime Association end the impasse in negotiations that is ravaging their ports.
These bold statements by leaders of landlord ports could signal a new direction for some of the nation’s largest gateways. In the past, executives at landlord ports stayed as far away as possible from issues they did not control, such as labor relations on the docks or chassis availability. However, with the responsibility of managing billions of dollars of investments in marine terminals and port-related infrastructure, the port directors now are using all means at their disposal to promote efficient use of their assets.
The ports of Seattle and Tacoma reported that their combined container volumes in January declined 13 percent from January 2014. Imports plunged 21 percent and exports declined 7 percent. This continued a trend that started in November when the ILWU began to allegedly hard-time employers in the Pacific Northwest. The PMA has recorded a consistent drop in container moves per crane, per hour, from about 26-28 historically to 18 or fewer today. The ILWU continues to state that congestion caused by cargo surges from big ships, and employer decisions to cut back on vessel unloading, are the chief culprits. The union denies that it is hard-timing employers.
Port directors up and down the coast are sparing neither party as they draw attention to the embarrassing plunge in cargo at their gateways.
“The ports continue to press the PMA and ILWU to resolve the impasse in contract negotiations,” Seattle and Tacoma stated in a joint press release. “While the ports do not have a seat at the negotiating table, we have been exercising the limited options available to try to mitigate impacts on our customers and to keep cargo moving,” the ports stated.
The Port of Oakland blamed the labor contract impasse and port congestion for a 32 percent drop in total container volume year-over-year in January. Containerized imports plummeted 39 percent and exports were down 26 percent. “With a decline in productivity and a breakdown in vessel schedules at all U.S. West Coast ports, cargo volumes are far from normal,” said John Driscoll, Oakland’s maritime director.
Container volume in Long Beach declined 18.8 percent in January year-over-year. Imports plunged 23.5 percent from January 2014 and exports were down 19.6 percent. Jon Slangerup, chief executive of the second largest U.S. container port, cited congestion and the contract impasse as the reasons for the port’s poor performance in January.
“We have been strongly urging the two parties to come to an agreement on a new contract so that we can clear the backlog of cargo on the docks and the ships anchored off the coast,” Slangerup said. He said the port is encouraged by the involvement of a federal mediator in the talks and looks forward to Long Beach “returning operations to a normal pace” when the contract negotiations are concluded.
The issues on the West Coast are impacting total U.S. trade because of the prominent role the ports have in foreign commerce. According to PIERS, the trade data arm of the JOC Group, Los Angeles is the largest U.S. container port and Long Beach is second. Los Angeles is expected to report its January numbers by early next week. PIERS reports that Oakland is number seven, Tacoma nine and Seattle 10 in the U.S. port rankings. The numbers are for January through September 2014.
Port executives in the past were content to enjoy their gateways’ high rankings, but with the West Coast bleeding cargo to ports in Canada and on the U.S. East and Gulf coasts, the West Coast ports are not only speaking out strongly on industry issues, but they are taking unprecedented measures to improve efficiency.
The Southern California ports are working with the major chassis leasing companies and pools to form a neutral, or gray chassis pool to begin operations in early March. Long Beach is purchasing chassis to be used during times of peak demands, and both ports have designated off-dock sites where tenants can dray off containers from congested terminals or store equipment.
Seattle and Tacoma, which for years competed fiercely for cargo, have taken the unprecedented step for Puget Sound of forming a Seaport Alliance to work jointly on issues affecting port productivity in their region. They also intend to jointly market their gateway and plan infrastructure development.
Oakland for the past year has been meeting regularly with terminal operators and the harbor drayage industry to improve gate times and reduce port congestion, hoping to unite what in the past has been a sector of the port community that has felt more comfortable pointing fingers at each other than in cooperating on potential solutions.
The West Coast ports, all of which are landlord ports, are taking this activist approach certainly to stem the loss of cargo to other ports. However, they are also looking beyond the current labor problems to issues of congestion that must be addressed for the long-term health of the industry. Big ships with capacities of 8,000 to as much as 14,000 20-foot containers call regularly now at West Coast ports. Some industry experts predict that by 2020 vessels with capacities of 18,000 TEUs will be serving the West Coast. Vessels of that size are already calling in the Asia-Europe trades, and ports in those regions are struggling to cope with the cargo surges that are created by big ships.
Also, the ports face multi-billion-dollar investments to rebuild existing terminals and expand their landside infrastructure to handle the cargo surges. The recent national focus on West Coast ports caused by the labor problems is shining a bright light on the importance of these ports to the national economy, and the need to improve cargo-handling productivity when the labor issues are finally resolved.