Labor dispute at West Coast ports threaten economy

Labor dispute at West Coast ports threaten economy
http://www.dailynews.com/business/20150117/labor-dispute-at-west-coast-p...

Container ship activity at the Port of LA. Cargo ships unloading at the Evergreen terminal.Brad Graverson — Staff Photographer
By Kevin Smith, San Gabriel Valley Tribune
POSTED: 01/17/15, 9:29 PM PST | UPDATED: 23 SECS AGO0 COMMENTS
If a labor dispute that has already slowed freight movement at West Coast ports becomes a shutdown it will take a heavy toll on the economy — both here and throughout the U.S.

A study by the National Retail Federation and the National Association of Manufacturers estimates that a 10-day shutdown would cost the nation’s economy nearly $2 billion a day and “could be catastrophic” for retailers, manufacturers, farmers and other industries across the economy that rely on the ports for both imports and exports.

Robert Kleinhenz, chief economist for the Los Angeles County Economic Development Corp., said the ports of Los Angeles and Long Beach play a crucial role in Southern California’s economy.

“The twin ports make up the largest port complex in the Western Hemisphere and 40 percent of the containers that arrive here from Asia come through the San Pedro complex,” he said. “International trade is one of the major industries that are crucial to expanding our local economy.”

The two ports employ about 15,000 full-time and part-time workers, according to Phillip Sanfield, a spokesman for the Port of Los Angeles. But nearly 900,000 truck drivers, dockworkers, warehouse employees and others throughout Southern California are directly or indirectly tied to operations at the ports, he said.

Lisa Foster has been heavily impacted by the labor situation at the ports. She owns 1 Bag at a Time Inc., a Venice-based business that sells reusable shopping bags imported from China. The bags are custom branded for her clients, which include supermarkets, hardware stores, nonprofits and universities, among others.

“I get two to three containers every month from the ports and getting those bags to my customers is at the heart of my business,” she said. “My minimum order is 1,500 bags and but I generally do orders of 50,000 to 150,000 bags at a time. Lately I’ve had delays of up to seven weeks from the time when a container arrives at the port to when I get it. A year ago it would have taken five to seven days.”

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Foster is hoping the labor dispute will be resolved soon.

“I’m nervous about how long it will last,” she said. “I don’t see how it helps anyone on either side to delay my freight.”

SNOWBALL EFFECT

Three Way Logistics in Corona is also feeling the pinch.

“We handle trades shows, so we move everything from catalogs to vehicles and everything in between,” said Henrique Schumann, the company’s manager of international operations. “We have international shipments that come in through the ports of Los Angeles and Long Beach, and because of the delays we’re facing several added costs.”

Fees related to last-minute storage, container detention and other fallout from the slowdown are adding up, he said.

“Some of the shipments are being released at the last minute,” he said. “It’s too close to deadline and that trickles down. So we may have a shortage of equipment, manpower and trucks when it’s finally released. It creates a snowball.”

Schumann said some of the Three Way’s shipments have been diverted to other ports in Houston, Miami and New York.

“It’s been worsening as the situation at the ports progresses,” he said. “You have gridlock and it creates a domino effect.”

PERMANENT LOSSES POSSIBLE

A 2014 report from Martin Associates, which provides economic planning studies for the port industry, notes that a shutdown would prompt cargo companies to ship their discretionary merchandise through other ports. That could result in a permanent loss of market share.

Discretionary merchandise are goods that arrive through a port and are routed to other parts of the country, such as the Midwest or East Coast. Since those products are destined for other locations, the competition to route them through other ports is fierce.

In 2014, discretionary cargo supported nearly 54,000 direct, induced and indirect jobs in California’s economy. And most of those workers were residents of the Los Angeles/Long Beach area, the study said.

On a bigger scale, discretionary, containerized cargo at the ports supported nearly 3 million jobs throughout other U.S. states last year.

The Martin Associates report notes that an 11-day shutdown of West Coast ports in 2002 affected not only the port industry and its employees, but importers and exporters as well as the nation’s entire transportation network and supply chain.

And the fallout was far-reaching.

Following the 11-day shutdown, container vessels experienced an average loss of 25 days of their schedule.

STALLED NEGOTIATIONS

Longshore workers and West Coast port operators have been working without a contract since July. The two sides reached a tentative deal on health benefits in August. But negotiations have stalled and the Pacific Maritime Association, which represents port managers in labor talks with the International Longshore and Warehouse Union, has become increasingly critical of union leaders.

The situation at Southern California’s twin ports deteriorated further on Tuesday when the PMA said their members wouldn’t be assigning any vessels or crews to move cargo on and off ships at night. They are instead focused on reducing the ever-growing pile of cargo containers they claim is the result of an intentional work slowdown by the dockworkers union.

Meanwhile, more than a dozen cargo ships are anchored offshore waiting to unload their goods.

A federal mediator arrived recently in San Francisco and is working with labor and management on the contract negotiations.

“The big issue for the complex as a whole is the diversion of cargo to other ports,” Sanfield said.

Sanfield said other ports in Canada have ramped up their operations and that additional ports are being built in Mexico where the same kinds of union issues don’t exist.

“The point is, we have unparalleled infrastructure, there’s 1 billion square feet of warehouse space in the Inland Empire and we have more than 100 trains coming in and out of the port complex every day.” he said. “The Port of Los Angeles is the top port in the nation based on a value and Long Beach is number two. All of that means jobs. We have about 900,000 port-related jobs throughout Southern California, 1.2 million in California and 3.6 million in the U.S. We are the economic engine and we need to make sure we keep these jobs.”

DELAYS ARE ‘NEW NORMAL’

Dan Gardner, a veteran shipping executive who is now president of the supply chain consulting firmTrade Facilitators Inc., said port delays are part of the new normal — a normal that will see most cargo delayed by two to three weeks.

“Solving the congestion problem is no easy task,” he said. “Normalization of the labor relations will help but you have bigger and bigger ships coming in. They have grown, whereas the real estate and resources have not grown to accommodate them.”

Ships carrying 8,000 TEUs, or 20-foot-long containers, used to be considered big. But modern cargo vessels can now carry 12,000 to 14,000 TEUs, he said.

Sanfield said those numbers will ramp up even more.

“We expect ships that can handle 18,000 TEUs over the next few years,” he said.

Port operations have also be impacted by a lack of available chassis, which are the trailers that hitch to trucks and are needed to haul cargo containers.

The National Retail Federation and Hackett Associates released a report last week that said year-over-year import cargo volume at the nation’s major retail container ports is expected to continue to rise during most of the first half of 2015 despite significant congestion still impacting West Coast ports.

The situation has been further complicated by alliances the shipping lines have formed. If one company’s cargo ship is only 70 percent full, another shipping company might fill up the remaining space with some of its own cargo. That makes the unloading process longer and more complicated because those products have to be separated out.

Gardner said the two- and three-week delays that he expects to become the norm won’t play well for Southern California’s twin ports.

“The big competitive advantage of the ports of Los Angeles and Long Beach is their proximity to Asia,” he said. “It takes about 19 days longer to ship products on an all-water route through the Panama Canal and all-water shipping is less expensive. But if you add two to three weeks of delays at the ports here that advantage goes away. Importers would be compelled to use other ports.”

Hundreds of longshore workers are expected to march down Harbor Boulevard in San Pedro on Thursday to protest the decision not to unload vessels at night at the two ports.