Freight Shipments to West Coast Ports Rise as Uncertainty Over Labor Pact Continues

This story appears in the Aug. 18 print edition of Transport Topics.

Freight shipments are accelerating through West Coast ports this summer, despite unresolved union contract talks, a new report said.

Shipments have been so strong that the National Retail Federation and consultant Hackett Associates predict container traffic will set a record of 1.54 million shipments during August among 12 of the largest U.S. ports.

The Port Tracker report includes activity at five West Coast ports — Los Angeles, Long Beach and Oakland in California as well as Seattle and Tacoma in Washington.

Leaders of the International Longshore & Warehouse Union, which represents dockworkers at those ports, continue to negotiate a new contract with the Pacific Maritime Association. The management group represents ocean carriers and terminal operators.

“The negotiations appear to be going well but each week that goes by makes the situation more critical as the holiday season approaches,” said Jonathan Gold, vice president of supply chain and customs policy at NRF, because the potential damage from a port disruption increases in tandem with peaking freight shipments.

The August forecast by Port Tracker would be the highest in 14 years, and just above July’s expected total of 1.53 million, a 5.3% year-over-year increase.

Gold told Transport Topics last week,“The cargo increase is a reflection of both a stronger economy and a response to labor uncertainty. We’re seeing the increase a little earlier as a result of contingency planning on behalf of importers.”

In past years, fall months most often were the ocean cargo peak.

ILWU and PMA negotiators returned to the bargaining table on Aug. 12 after a tentative agreement was reached the day before among ILWU and three grain handling terminal operators in the Pacific Northwest.

The PMA-ILWU contract talks were recessed for six working days while the grain handling agreement was worked out to cover members of five locals in Seattle, Portland, Oregon, and Vancouver, Washington.

Cargo shipments began to swell in the spring, when retailers started to step up imports in advance of the June 30 expiration of the West Coast labor contract. Both sides have promised for months to continue moving cargo without disruption as talks have continued 10 weeks without a contract.

There were other indicators last week of a solid summer cargo season.

A freight report published by Cass Information Systems showed its July index of domestic shipments, primarily made by truck, rose 4.2%.

The Cass report, dated Aug. 12, highlighted expectations that domestic freight volumes will rise for the next four or five months. Reasons cited in the report were improved economic conditions in the United States, as well as more domestic freight that moves inland as imports from China rise.

Economist Rosalyn Wilson, who also writes a maritime cargo report for Cass, told TT last week that “there should be very strong growth in August” on the ocean shipping front.

NRF’s Gold explained that there are risks involved for retailers as they step up the cargo pace.

“It is extremely difficult to divert cargo once it’s on the vessel heading towards the West Coast if [labor] problems arise,” he told TT. “That decision will be up to the ocean carrier. There will be significant issues that need to be addressed if a vessel was to be diverted, including work with U.S. Customs and Border Protection on the diversion.”

There also have been related events in Canada.

DP World, a terminal operator at the Port of Vancouver, British Columbia, stopped accepting U.S.-bound imports last week because of a surge in cargo that overwhelmed operations. Other Vancouver terminals didn’t bar U.S. imports, a port spokeswoman said.

Gold noted that current capacity issues at Vancouver and Prince Rupert, British Columbia, make potential diversions difficult.

The Port Tracker report said the June cargo total was 1.48 million units, 9.1% above the same month of 2013, and almost the same as May. The report forecast increases in the 2% to 3% range over 2013 levels for the last four months of this year.

Six East Coast ports are included in the Port Tracker report, along with Houston on the Gulf Coast. The East Coast ports are New York/New Jersey; Hampton Roads, Virginia; Charleston, South Carolina, Savannah, Georgia; and Port Everglades and Miami, Florida.

In a separate commentary, Fitch Ratings said that if talks continue much longer, “Some shippers may continue to use alternative ports even after the ILWU contract is finalized and the risk of a strike or slowdown has passed.”

Such a shift could hurt U.S. ports’ credit ratings, Fitch said, though a short strike or slowdown wouldn’t have a lasting effect.