Digital Edition

May 26, 2014

Issue link:

Contents of this Issue


Page 21 of 99

20 THE JOURNAL OF COMMERCE MAY 26.2014 TOP 100 IMPORTERS AND EXPORTERS By Bill Mongelluzzo TWO-THIRDS OF SHIPPERS who participated in a JOC survey this month plan to divert at least some cargo away from U.S. West Coast ports to avoid disruption that could emerge from contract negotiations between the International Longshore and Warehouse Union and West Coast employers. Negotiations began May 12 to replace the current six-year contract, which runs through June 30. The risk of a strike, lock- out or other form of disruption is greatest during times of waterfront contract nego- tiations, and thus these are the times when cargo interests take precautionary action to avoid ports that might be affected. They did the same thing two years ago during con- tentious East and Gulf Coast negotiations between employers and the International Longshoremen's Association. Fully 66 percent of 221 shippers who responded to the survey, conducted May 12-14, will divert at least some of their cargo through non-West Coast ports. Of those who are diverting, 73 percent will ship through East or Gulf Coast ports, 25 percent will ship through Canadian ports and 2 percent through Mexico. Of those shippers who plan to use other ports, 29 percent said they will divert less than 10 percent of their total cargo volume, 31 percent will divert 10 to 25 percent and 40 percent will divert more than 25 percent of their volume. For many shippers, the locations of their distribution centers in the U.S., or related logistics factors, make it diffi cult to divert. Some 42 percent said they have no viable alternatives to West Coast ports, while 25 percent said it's too costly and 8 percent said it's too late now to divert. If comments filed anonymously by respondents are an indication as to how shippers are planning their supply chains to avoid possible disruption, it appears ports will be busier than usual in June because many shippers are moving goods earlier. A number of responses included com- ments such as "pulling orders forward early into June," "asking customers to carry more inventory" or "ordered heavy to have goods arrive early." Respondents who are diverting cargo indicated they learned a difficult lesson from the 10-day employer lockout dur- ing the 2002 negotiations and have made plans early this time to divert cargo. Some importers, however, said their supply chain logistics dictate against diversion. There is evidence that diversions already are under way, at least to the U.S. East Coast. Carriers report all-water services to the East Coast are sailing at close to capacity. Spot rates from Shanghai to the U.S. East Coast are up 5.2 percent year-over-year, while rates from Shanghai to the U.S. West Coast are down 4.5 percent, according to the latest Shanghai Containerized Freight Index data. "To divert major volumes would be futile and way too costly," one respondent said. A number of respondents referred to predictions at the JOC's TPM Conference in March that a contract would be reached this summer without a work stoppage. In a joint statement when negotiations began this month, the ILWU and PMA said they "expect cargo to keep moving until an agreement is reached." Shippers, however, don't anticipate that the contract negotiations will be driven by what is best for cargo interests. Asked in the survey whether their needs are being adequately addressed in the negotiations, 81 percent said, "No." JOC Contact Bill Mongelluzzo at and follow him on Twitter: @billmongelluzzo. Source: JOC Survey 42% 25% 8% 26% JOC SURVEY RESULTS: SHIPPERS' PLANS FOR CARGO DIVERSION YES 66% NO 34% Do you plan to divert freight away from the U.S. West Coast due to the ILWU negotiations? YES 19% NO 81% Less than 10% 29% 10-25% 31% More than 25% 40% U.S. East or Gulf Coast 73% Canada 25% Mexico 2% OTHER TOO LATE TO DIVERT TOO COSTLY LACK OF ALTERNATIVES If you do not plan to divert your freight, why not? In your opinion, are shippers' needs adequately being addressed in these negotiations? If so, approximately what percentage of your freight will be diverted? If so, where will you divert to? BCOs Won't Wait JOC survey suggests widespread diversions from U.S. West Coast because of ILWU contract talks

Articles in this issue

Links on this page

Archives of this issue

view archives of Digital Edition - May 26, 2014