West Coast Ports Deploy Workers to Alleviate Three-Month Backlog

(Bloomberg) -- The two busiest U.S. seaports are facing their largest backlog of ships in more than a decade, even with hundreds of dock employees returning to work after their union reached a tentative labor contract.

Cargo backups and delays continue to bedevil the neighboring ports of Los Angeles and Long Beach, which together handle about 43 percent of U.S. imports and 27 percent of exports.

The backlogs may take as long as three months to untangle at the Los Angeles port, the nation’s busiest, said Executive Director Gene Seroka. The mayors of Los Angeles and Long Beach expressed concern Monday about losing business to other ports over the long run because of congestion and the possibility of another labor flare-up.

’’I don’t want to lose 1 percent, let alone 6 or 9 percent,’’ Los Angeles Mayor Eric Garcetti said at a press conference. “If you lose 6 or 9 percent at this port of discretionary cargo, that’s a lot of jobs, it’s billions of dollars of goods and that’s important for us. This is still the best place to come, despite the past few months and how this got extended out.”

Manufacturers and retailers began airlifting goods and bypassing West Coast ports beginning in November, when a dispute over a contract for 20,000 dockworkers led to job actions that slowed down cargo at seaports from San Diego to Bellingham, Washington.

Market Share

West Coast ports might continue to lose market share to rivals in Canada and on the East and Gulf coasts, though they have built-in advantages, said international trade economist Jock O’Connell. The Southern California ports rarely experience bad weather of the magnitude of snowstorms on the East Coast and hurricanes in the Gulf, and Eastern ports have their own labor issues, O’Connell said by telephone from Sacramento. Also, Los Angeles and Long Beach are deepening harbors and taking other measures to accommodate the largest container ships, which many ports cannot handle, he said.

Thirty-five ships were queued up Monday outside the Ports of Los Angeles and Long Beach in the biggest backup since railroad tie-ups choked off the flow of cargo in 2004, said Kip Louttit, who heads the Maritime Exchange of Southern California. That’s up from as few as four in December.

“Ships are still arriving, and they need to get the whole machine going again,” said Louttit, whose nonprofit group provides information on ship traffic and helps guide vessels to berths. “It’s not automatic that congestion is going down just because they have an agreement.”

‘On the Way’

Now that talks have ended, workers are “committed to making these cans move,” said Bobby Olvera, president of ILWU Local 13, which represents 7,000 Southern California dockworkers.

“If you’re listening to this in Connecticut or New York back east in the snow, your goods are on the way,” Olvera said. “No other workforce in the world does what we do here.”

The Pacific Maritime Association, which represents management, and the International Longshore and Warehouse Union, representing 20,000 dockworkers, reached the deal on a five-year contract Feb. 20 after U.S. Labor Secretary Tom Perez imposed a deadline to resolve the nine-month dispute. The labor strife had led to backups that left merchandise at sea and retailers and manufacturers sending products by air and diverting to ports on the East and Gulf Coasts.

‘Significant Impacts’

“Our focus now is getting cargo moving,” Chad Lindsay, PMA’s vice president said at the news conference. “There have been significant impacts to many and we haven’t lost sight of that.”

The association reported that 2,557 longshore jobs were posted for the first shift Monday at the Los Angeles and Long Beach ports, up from 230 during the equivalent shift a week earlier, when cargo operations were suspended for the President’s Day holiday.

U.S. retailers aren’t yet seeing West Coast ports as a viable option and will continue to divert shipments elsewhere, said Jonathan Gold, vice president of supply chain and customs policy at the retail federation, a Washington-based trade group representing stores and wholesalers.

Port workers still have to ratify the agreement and the cargo backlog has yet to be cleared, he said.

‘Extremely Frustrated’

“The need for a reliable and stable supply chain is priority No. 1,” he said. “We’ve heard from a lot of members who were extremely frustrated throughout the entire process and are considering a full move to other ports to avoid the West Coast.”

Retailers are trying to get merchandise to stores “so that a consumer doesn’t see an empty store shelf,” he said. Products including patio sets, barbecue grills, clothing and shoes slotted for spring sales are being affected, he said.

The labor dispute will cost retailers an estimated $7 billion this year, mostly because of lost sales and higher shipping costs, said Frank Layo, retail strategist at Kurt Salmon in Atlanta.

“Every container that goes somewhere else comes with an additional cost,” Layo said. “People go to L.A. because it’s cheap and it’s fast. By definition, everything else is slow and more expensive.”

Gross Domestic Product

It’s unclear what impact the agreement will have on growth of gross domestic product because much depends on how quickly ports get through the backlog, said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. LaVorgna predicts GDP will grow 3.1 percent in the first quarter, while it might end up being lower.

“It is not inconceivable that by the end of the next month, a lot of the backlog has been worked through,” he said.

News of a tentative contract agreement also didn’t bring much relief to AJ Khubani, chief executive officer and president of Telebrands Corp., which markets the PedEgg Power, Pocket Hose, Hurricane Spin Mop and other “As Seen on TV” products.

Khubani said his Fairfield, New Jersey-based company has incurred hundreds of thousands of dollars in air freight fees, as well as additional costs for leaving containers at ports too long. Telebrands has lost about $400,000 a day in sales since backups began in October, Khubani said in a telephone interview.

Work Disruptions

Work disruptions continued at the Port of Oakland, the fourth-busiest on the West Coast, which on Monday faced a temporary shortage of crane operators, who load and unload vessels, said Michael Zampa, a port spokesman. The result was light traffic at most terminals and some cargo being prepared for shipment, with full operations to return in the evening, he said.

While work there had resumed Saturday night, operations were suspended for part of the day shift on Sunday over a break-time dispute between labor and management. A local arbitrator ruled the work stoppage by the longshoremen was illegal, the Pacific Maritime Association said in a statement. They returned to work Sunday night, Zampa said.

Nine vessels were at berth at the port, and 18 more awaited a slot, he said.

Labor shortages related to the contract talks haven’t been the only issue slowing down commerce. Long Beach, for example, has been hampered by congestion resulting from the inefficient loading of the latest generation of giant ships and a lack of truck chassis to transport cargo containers, Jon Slangerup, chief executive officer of the Port of Long Beach, said this month.

Work was in full swing at the Los Angeles port, where 22 ships were berthed and being unloaded and loaded, while another 35 waited nearby, said Seroka, the port chief.

“It may take us three months to get back to a sense of normalcy,” he said. “That work begins today.”

Source: Bloomberg Business