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Waking up from the West Coast port nightmare: Where do we go from here?

March 9, 2015 – Assuming that the rank and file of the International Longshore and Warehouse Union (ILWU) ratifies the new five-year contract negotiated with terminal operators, West Coast ports can finally focus on getting container-handling operations back to normal. So is everyone happy?

Far from it. 

There’s a tremendous amount of residual anger on the part of shippers, stemming from months of disruption and delay caused by the union’s deliberate work slowdown – a tactic that seemed aimed at triggering an employer lockout. (At which point, of course, the union could blame management for the shutdown.)

The ILWU was attempting to force management to concede on a number of controversial points, most notably a demand that the union be permitted unilaterally to dismiss any arbitrator with whom it was displeased. The previous contract required assent from both sides for an arbitrator’s removal.

Negotiations to replace the contract that expired last July dragged on for more than seven months – far longer than anyone had anticipated. 

Jon Slangerup, chief executive officer of the Port of Long Beach, called it “a shocking situation for industry,” and said the port “felt blindsided” by the congestion that came close to bringing operations to a total halt. 

He was joined by Port of Los Angeles executive director Gene Seroka on a panel at the 15th annualTranspacific Maritime Conference (TPM), hosted by the Journal of Commerce in Long Beach.

The union had denied that it was engaged in a concerted slowdown, charging that it was “deceptively” being blamed for the crisis by the Pacific Maritime Association, which represented terminal operators in the negotiations. 

The real reasons for the congestion, ILWU claimed, included a shortage and “mismanagement” of chassis, rail service delays, lengthy truck turn times and record import volumes entering West Coast ports. 

What it failed to explain was the mysterious and abrupt drop-off in labor productivity that took place around the beginning of November, when the union began holding back qualified yard crane operators. 

During that month, the number of operators reportedly plunged from 110 to 35 a day. And severe work slowdowns were seen simultaneously at every big West Coast port.

 The result: as of mid-February, 29 ports in the region, which handle 44 percent of containerized cargo in the U.S., were running at between 50 and 60 percent capacity, according to CBRE Group, Inc.

Things just kept getting worse, despite howls of pain from importers and exporters, billions of dollars in losses by retailers, and mounting support from federal, state and local officials for an end to the crisis. Meanwhile, ships were stacking up outside the harbors, incurring escalating bunker fees while valuable merchandise sat idle.

The logjam was finally broken when President Obama sent U.S. Secretary of Labor Thomas Perez to the West Coast to personally oversee the negotiations and bring them to a close. And those problems that the union claimed were really responsible for the congestion? They magically began to dissipate, as full gangs of dockworkers returned to the jobs for which they were hired, and began the task of clearing out the backlog of ships and containers.

The task won’t be easy. At the height of the crisis, there were more than 30 ships waiting to dock at the ports of Los Angeles and Long Beach. At TPM on March 2, Slangerup said the number of vessels at anchor was being reduced at the rate of three per day. Seroka said 33 vessels in the harbors were actively being worked that day, with the first shift consisting of more than 100 gangs and some 2,775 dockworkers.

They have no time to lose. At the conclusion of Chinese New Year, the ports will see a fresh wave of cargo from Asia entering their harbors, so it’s imperative that terminals get the delayed containers moving. 

Seroka estimated that it will take about three months “to get back to a sense of normalcy.” Others in the TPM audience worried that full recovery could take several months longer than that.

The ports of Los Angeles and Long Beach don’t directly operate terminals, so their ability to influence activity on the docks is limited.

 Nevertheless, said Slangerup, the ports are doing what they can to provide “relief valves” for stalled containers, including the opening of additional yard space to allow for the “peeling off” of boxes from shipside, and speedier transfer to chassis or trains.

“Our biggest focus is staying on our game,” said Slangerup, “making the necessary investment to increase our throughput and operations.”

It’s not just a question of getting things back to previous levels of activity.

 West Coast ports will have to adjust to a “new normal” that involves handling ever-greater number of containers with unprecedented efficiency.

The union was right about one thing: there are some serious structural problems that are keeping the ports from reaching their maximum potential. Seroka said the Port of Los Angeles has an annual operating capacity of 14 million 20-foot equivalent units, “yet we are gridlocked at 8.3 million TEUs.”

Even on a good day, West Coast longshore labor falls short of productivity levels set by its counterparts elsewhere in the world, such as Hong Kong, Shanghai and Rotterdam. But it’s not entirely the workers’ fault. Current port infrastructure wasn’t designed to handle the latest generation of megaships, some able to carry up to 18,000 TEUs. (And expected to top 20,000 TEUs in the years ahead.) The largest ships can’t even call most U.S. ports because of limitations on water depth, berth length, clearances and cranes. But even a vessel of 13,000 TEUs can dump a huge number of boxes onto the pier at one time, and the resulting strain on yard space, chassis, hostlers, trucks and trains is just too much for American ports to handle efficiently.

Think of the mess triggered by the longshore contract talks as a wakeup call. Matthew Shay, president of the National Retail Federation, told TPM that the ability of a small group of individuals to paralyze maritime commerce “shouldn’t be tolerated.” Neither should the current state of our nation’s ports and intermodal infrastructure.

Source: Supply Chain Brain

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