West Coast ports likely to lose market share in 2015, survey finds

Mark Szakonyi, December 15, 2014, JOC.com

Sixty-percent of U.S. shippers surveyed by JOC.com say they plan to ship less cargo through the U.S. West Coast next year because of ongoing congestion and delays, suggesting that ports from Long Beach to Seattle could lose market share just as they did after a 10-day work stoppage in 2002.

 

Forty-four percent of the shippers that plan to ship less cargo through the U.S. West Coast say they will reduce their throughput between 10 and 30 percent at such ports, according to a survey of 87 shippers. The majority of shippers (36 percent) said they planned to shift the most of the cargo from U.S West Coast ports to U.S. East Coast ports.

 

“We have decided to shift at least one-third of our volume permanently from the U.S. West Coast to the U.S. East Coast and one-third (of volume) to Canada,” one surveyed shipper said. “We are tired of being held hostage by the ongoing situations at these ports.”

 

Even though the peak holiday shipping season is over, shippers are still seeing long delays at U.S. West Coast ports, with some complaining it hasn’t been this bad since 2002. At that time, the West Coast waterfront employers’ decision to lock out the International Longshore and Warehouse Union and the resulting damage to their supply chains spurred shippers to permanently reroute cargo to the U.S. East Coast.

 

The degree to which shippers reroute cargo away from the U.S. West Coast ports is largely dependent on how much longer it takes the ILWU and the Pacific Maritime Association to reach a deal and end work slowdowns. Twenty-one percent of surveyed shippers told JOC.com they haven’t made up their minds on whether to route less cargo though U.S. West Coast ports.

 

“We are taking a wait-and-see approach. We believe the port congestion issue will subside once there is a collective bargaining agreement in place,” one surveyed shipper said. “If this does not pan out, then we will seek alternative solutions to make sure we do not have any supply interruptions.”

 

In a contract caucus, starting today, ILWU leaders are expected to determine whether there has been enough progress to reach a tentative agreement with the PMA, which represents waterfront employers, or keep bargaining. The ILWU denies that it’s slowing down work, and places the blame on chassis dislocation, near record volume and some marine terminals’ inability to handle larger vessels.

 

Many shippers have already diverted cargo through British Columbia’s Port Metro Vancouver and Port of Prince Rupert this year, but survey results suggest many of those reroutings will become permanent. Twenty-eight percent of shippers that plan to reroute cargo away from the U.S. West Coast said the western Canadian ports would receive the majority of their redirected freight next year. Of those shippers who plan to reroute cargo away from West Coast, 15 percent said they would shift the majority of freight through U.S. Gulf Coast ports, while 6 percent plan to use Mexican ports. But for many shippers, rerouting isn’t an option.

 

“We are a manufacturer located in San Francisco. We import raw materials from Europe, India, and Asia. I think we are stuck with what we’ve got,” one shipper said.

 

Others said routing through the U.S. West Coast is still their best option — even with the long delays. One shipper importing goods to Indiana and Arkansas, for example, said the transit times via routing through the U.S. Gulf and East coasts are still too long and the total costs are higher.

 

“Of course, if congestion charges are going to be implemented by the carriers, that will change how we look at routings, the shipper said. “But then everyone is going to try to bypass the West Coast, which is going to jam all other routings.”

 

Then-President George W. Bush ended the 2002 lockout by invoking the Taft-Hartley Act, but by then many shippers had already seen the damage of depending too much on routing via the Los Angeles-Long Beach port complex and other West Coast gateways. The U.S. West Coast’s share of U.S. containerized imports fell from 50 percent in 2002 to 43.5 percent in 2013, and their share of U.S. containerized exports shrank from 50 percent to 40 percent, according to a report conducted by maritime economist John C. Martin on behalf of the PMA.

 

“As a company, we were debating the pros and cons of investing in an East Coast facility to complement the West Coast facility,” said one shipper that has historically moved all of its volume through U.S. West Coast ports.” This crisis pushed it over the fence, and we are moving forward with it.”

 

Nineteen percent of surveyed shippers plan to reroute between 5 and 10 percent of their cargo away from U.S. West Coast ports next year, and the same percentage plan to shift between 30 percent and 50 percent of their cargo away from the coast in 2015. According to the survey, about 16 percent of shippers plan to reroute more than half of their cargo away from the West Coast.

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