Anchored Ships Weighing on U.S. Economy
Many businesses suffer from West Coast port disputes, while hope for the future lies in one of the world's modern wonders.
By Andrew Soergel
Feb. 20, 2015 | 3:44 p.m. EST
More than a decade after a 2002 labor dispute ground West Coast ports to a halt for nearly two weeks, costing the domestic economy an estimated $1 billion each day, nearly 30 ports again are embroiled in a monthslong impasse carrying an exorbitant price tag.
The labor contract between the International Longshore and Warehouse Union, representing roughly 20,000 dock workers, and the Pacific Maritime Association expired at the end of June. And while the two sides have been unable to reach a compromise on a new agreement, longshoremen have continued to work during the winter months without an official labor contract.
“It’s been a long-standing problem, where the longshoremen use that time of year to their advantage to negotiate more labor benefits,” says Tom Hullinger, chief operating officer at HNM Global Logistics, a Florida-based transportation and logistics firm. “And typically, once you get through the peak season [in the summer and early fall], the labor disputes kind of go back to a normal schedule. But this year they haven’t. And it’s now gotten to a point where you have container vessels anchored off the coast because they don’t have a dock to berth at to unload the containers.”
A union representative tells U.S. News the two parties have ironed out most wage-related details and that the bulk of the unresolved issues have nothing to do with payment, though the Pacific Maritime Association has touted its offer of increasing union wages 14 percent over the next five years. The representative says negotiations have been mired by technicalities, mostly related to a particular arbitrator’s terms of employment.
The maritime association since the fall has accused dock workers of slowing productivity, saying in a statement earlier this month it had decided to suspend hours over the Presidents Day weekend to avoid “paying full shifts of [union] workers such high rates for severely diminished productivity while the backlog of cargo at West Coast ports grows.”
“When that supply chain shuts down for four days, that’s going to have a reciprocal effect across the United States of America,” says Tony McGee, CEO and founder of HNM Global Logistics and a member of the Commerce Department’s Advisory Committee on Supply Chain Competitiveness. “That’s a very scary thing. For us as a small business, we can’t give our customers a date on when we can actually get their product in from overseas.”
The union, meanwhile, says management is at fault for having recently abandoned night and evening shifts – a move that significantly cuts the amount of hours available for dock workers. Night shifts were indefinitely suspended at the 29 West Coast ports on Jan. 13, limiting loading and unloading activity to roughly an eight-hour window at a group of ports that received 43.5 percent of all U.S. imports in 2013, according to a report from the Pacific Maritime Association.
In the meantime, the backlog of idle ships at West Coast ports is growing. Dozens of cargo ships have anchored near ports in Los Angeles and Long Beach, California – two ports that in 2013 handled more than 71 percent of all West Coast container shipments – in recent days.
Shipping companies also have begun rolling out surcharges of up to $1,000 for containers stranded aboard their ships in efforts to cover expenses related to the failed deliveries – costs McGee says are passed down through the supply chain and eventually to the end consumer.
“You have multiple container vessels ready to unload, and we have companies in the United States waiting on that product that’s in those containers,” Hullinger says. “And those containers, every day that they’re delayed, it’s costing the U.S. companies more money because of the detention fees the container lines have to impose on that equipment. This has a direct impact on commerce.”
At least five Honda Motor Co. plants in North America have wrestled with parts shortages in recent days as a direct result of the backlog, though two Ohio facilities and a plant in Canada received shipments by air this week and have since resumed normal operations. Still, at least two Honda facilities – one in Indiana and one in Canada – are expected to trim production by about 5,000 vehicles as parts shortages hinder the company’s assembly line.
Between Feb. 16 and Feb. 23, Honda reportedly will have slashed production by 20,000 vehicles, according to The Associated Press.
Produce and citrus shipments also are rotting at California ports, and the North American Meat Institute estimates the conflict is costing the meat and poultry industry “more than $40 million per week in lost sales and unexpected export charges.”
Joe LaVorgna, chief U.S. economist at Deutsche Bank, said in a research note Wednesday that the port slowdown could drag on America's fourth-quarter gross domestic product, according to Business Insider. That revised indicator will be released by the Commerce Department on Feb. 27.
West Coast ports handle about 70 percent of U.S. imports from Asia, which are then sent largely by truck or train to the rest of the country, though that ratio could change with the completion of a more than $5 billion project to expand the Panama Canal.
“The Panama Canal is going to be both deepened and widened, and the size of the ship that can come through would actually allow it to carry about three times the number of container units that the current Panama Canal does,” says Jim Walker, navigation policy and legislation director for the American Association of Port Authorities.
The international effort is being largely overseen by the Panamanian government's Panama Canal Authority, and its completion has been pushed back to late 2015 or early 2016 amid cost overruns that have exceeded $2 billion.
But once finished, the Central American waterway could open ports along the Gulf Coast and eastern seaboard to bigger transport vessels, potentially making Asian trade along the route more cost-effective.
page 2
http://www.usnews.com/news/articles/2015/02/20/west-coasts-anchored-ships-weighing-on-domestic-economy?int=9b9e08
