Some news this week on the port slowdown: Monday the AP reported that
Negotiators working on a new contract for dockworkers at West Coast seaports, which handle about $1 trillion worth of cargo annually, have resolved a key dispute in their difficult talks, an association representing employers said Monday. . . .
The new agreement addresses neither wages nor pensions, but what would seem an ancillary issue: who maintains and repairs the truck beds used to haul containers of cargo from dockside yards to distribution warehouses. Chassis repair became a big stumbling block, however, because automation at seaports is expected to take jobs — and the International Longshore and Warehouse Union wants to find new members where it can.
But even with this progress, as the Wall Street Journal notes,
it will take months to end the widespread pain, freight disruptions, and losses caused by the massive cargo traffic jam.
The near-paralysis at the ports is rippling through the economy. Railroads are reducing service to the West Coast. Cargo ships have slowed down—and even turned around—as containers have stacked up at the ports. . . .
The Economist, under the striking title “Watching fruit rot,” writes about the impact this is having on West Coast port competitiveness:
Meanwhile, frustrated exporters and importers will find other routes. In a recent survey by the Journal of Commerce, 60% of shippers said they had begun redirecting cargoes away from America’s West Coast ports. Once that business leaves, it may never return. Western ports have already lost market share to the East Coast since 2002, when failed labour talks led to an 11-day lockout and a total shutdown.
More ominously, the Panama Canal is being widened to accommodate larger ships. That task will soon be completed, allowing ships from Asia to bypass the West Coast entirely and deliver goods directly to the Eastern seaboard. Jacksonville, Florida opened a new container terminal in 2009; traffic from Asia is already booming, even before the new-look Panama canal opens.
Indeed, the Journal of Commerce has an example of cargo moving elsewhere:
Labor disputes on the West Coast and a recovering national economy sent record-breaking cargo volumes to Georgia ports in 2014. . . .
While disputes on the West Coast continue to snarl traffic in and out of Los Angeles-Long Beach, Oakland and the Pacific Northwest, Foltz said strategic investments on his end have been able to entice shippers to Georgia’s congestion-free seaports.
As a result, December, usually one of the slowest months of the year, marked Georgia’s second-busiest month on record, moving 277,633 TEUs.
Meanwhile, in a broader note about trade, Peter Tirschwell writes in the Journal of Commerce about the problem of port congestion:
[Moffat & Nichol economist Walter] Kemmsies said the biggest threat to global trade isn’t protectionism, war, terrorism, disease or natural disaster. Instead, it’s mounting congestion at ports around the world, a phenomenon that’s been building for years and burst out into the open in 2014.
“That’s my big fear for global trade,” Kemmsies said.
With a growing middle class throughout the developing world demanding a greater quantity and variety of consumer goods, the pressures are growing. The United Nations projects the middle class globally will more than double in size in the next 15 years, rising from about 2 billion today to 4.9 billion in 2030. “If we actually get that many people — almost 5 billion — in the global middle class, our industry is going to completely collapse. The congestion will be that severe,” Kemmsies said.
The idea that port congestion isn’t just temporary is gaining currency, despite the counterintuitive reality that global trade is likely to slow this year. There is a lengthy list of reasons for this, but they all add up to the same conclusion: The hardships U.S. shippers are experiencing at West Coast ports, even if it’s partly the result of longshore labor slowdowns, is just one example of a phenomenon playing out globally. No matter where you’re importing or exporting, if it’s moving in a marine container, you should be planning potentially weeks of additional lead time into your supply chain.
That the middle class is growing globally seems like an excellent problem to have.