Oakland port disruption underpins support for West Coast cargo shift
Cargo-handling operations were disrupted at the Port of Oakland Wednesday, providing fresh vindication for importers who are diverting growing volumes of cargo to the East and Gulf coasts amid contentious longshore contract talks on the West Coast. That shift is likely to continue until a labor deal is reached, which some believe won’t happen anytime soon.
In the latest disruption linked to the contract talks, marine clerks from the International Longshore & Warehouse Union (ILWU) picketed at Oakland over a travel pay issue for dockworkers who come into the port from outlying locations. That forced three of Oakland’s four container terminals to halt operations for Wednesday’s first shift, a port spokesperson told JOC.com.
Terminal operators that shut their facilities for the entire first shift intend to reopen for the evening shift Wednesday. “Our international marine terminals are closed today and will try to reopen tonight,” the spokesperson said.
Such ad-hoc work stoppages and slowdowns, which have hit all West Coast ports since the previous contract between the ILWU and the Pacific Maritime Association (PMA) expired on July 1, are contributing not only to declining cargo volumes, but also to a large drop in man-hours worked by West Coast longshoremen this fall.
The PMA said in Wedneseday statement that the attempt to shut down terminals to gain leverage in local negotiations was “counterproductive.”
According to the PMA, despite declining cargo volumes at West Coast ports, ILWU paid man-hours this year were running about 3 percent higher than last year until September. In September, man-hours turned negative, declining 3.9 percent from September 2021. The drop in man-hours has accelerated since then, falling 7.6 percent in the first three weeks of October year over year. Terminal operators say they are being told by carriers to expect cargo volumes to continue moving lower through the first quarter of 2023.
The stark contrast between the fortunes of West Coast ports and East and Gulf Coast ports is confirmed by coastal market shares through September. The West Coast’s market share of US imports from Asia fell to 57.5 percent through the first nine months of the year, down from 61.2 percent in the same period last year. The share for East Coast ports increased to 35.1 percent from 32.8 percent, while the Gulf Coast’s share ticked up to 7.1 percent from 5.7 percent, according to PIERS, a JOC.com sister product within S&P Global.
Cargo interests fed up with labor uncertainties
A non-vessel-operating common carrier (NVO) said clients are telling him they can no longer tolerate work slowdowns and other job actions at West Coast ports that have accompanied almost every longshore contract negotiation for the past 20 years. Customers are saying they will continue to ship as much of their discretionary cargo as possible through ports on the East and Gulf coasts.
“Fool me once, shame on you. Fool me eight times, shame on me,” the NVO said. JOC.com spoke with three terminal operators, two container lines, three industry consultants, and three NVOs for this story; all spoke on the condition of anonymity.
West Coast terminal operators told JOC.com they have been canceling shifts over the past several weeks even when there are no work stoppages or slowdowns because cargo volumes moving through the ports are declining rapidly.
“This cargo fall-off has continued for a couple of months. We have shut gates ad hoc and we will continue to shut gates,” one terminal operator said.
The sources told JOC.com that since the West Coast loses discretionary cargo volume every contract year – some of which never returns – ILWU and PMA negotiators should do whatever is necessary to reach a contract as soon as possible this year or more cargo will be lost forever.
“I hope that both parties now realize that dragging their feet is not helpful to either. They’re in this together,” a mid-size retailer said.
Declining man-hours hit dockworkers where it hurts
Some terminal employers note that the rapid decline in man-hours over the past two months, which at first affected only part-time longshoremen, known as “casuals,” but is now cutting into the earnings of full-time, or registered, longshoremen, may be what it takes for the rank-and-file to push their negotiators to reach a contract settlement.
“One would think so,” a terminal operator told JOC.com. “Cargo volumes fell off the cliff in September and it was even worse in October.” The source expects cargo volumes and man-hours to drop off even more in November due to normal seasonal lulls plus the loss of additional discretionary cargo.
“The (shipping) lines are telling us volumes will be off through the first quarter of 2023,” another terminal operator said. “The casuals’ hours were down through September, but now all man-hours are dropping dramatically.”
Rail uncertainties also hurting West Coast ports
While carrier executives and consultants told JOC.com that shipper uncertainty over labor on the West Coast is the main reason why ports continue to lose discretionary cargo, additional factors are at work this year, they say.
Warehouses, especially in Southern California, have been filled to capacity for much of the year because retailers ordered merchandise earlier than usual. It is now evident they ordered more than they needed, which is contributing to supply chain delays, so retailers have been diverting cargo to the East and Gulf coasts to avoid the bottlenecks on the West Coast, a carrier executive said.
West Coast ports depend on intermodal rail for shipping about two-thirds of their imports to the eastern half of the country. Ongoing uncertainties over railroad contract negotiations with labor unions have also motivated retailers to avoid West Coast ports. And congested rail ramps in Chicago, Memphis, and Dallas and rail containers that dwell too long at West Coast ports have likewise put those ports at a disadvantage, an industry consultant said.
“So it’s concerns about the railroads and the ILWU,” the source said.
Terminal operators said they have no choice but to cut back on hours by canceling work shifts under these conditions. “We’ve done this recently, and more terminals are doing it now,” one operator said.
Source: The Journal of Commerce (JOC)
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