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Nov.10, 2014

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4 THE JOURNAL OF COMMERCE Editor's Letter ©2014 The Journal of Commerce — All Rights Reserved For more information, visit our Web site, EXECUTIVE EDITOR, THE JOURNAL OF COMMERCE AND JOC EVENTS Chris Brooks 973.776.7818 MANAGING EDITOR Barbara Wyker 973.776.7817 ASSOCIATE MANAGING EDITOR, JOC.COM Mark Szakonyi, 202.499.2295 SENIOR EDITORS Joseph Bonney, Finance and Economics 973.776.7809 William B. Cassidy, Trucking and Domestic Transportation 202.499.2285 Bill Mongelluzzo, Trans-Pacific 562.428.5999 Greg Knowler, Asia +852 3975 2647 EDITOR-AT-LARGE Peter T. Leach, Trans-Atlantic 212.755.0940 RESEARCH EDITOR Marsha Salisbury 973.776.7828 ECONOMIST Mario O. Moreno 973.776.7850 SPECIAL PROJECTS EDITOR Alessandra Gregory Barrett 860.248.5238 SPECIAL PROJECTS EDITOR, ASIA Annie Zhu +86 (21) 60396986 SENIOR DESIGNER Sue Abt, 973.776.7825 DESIGNER Bryan Boyd, 973.776.7827 ASSOCIATE WEB EDITOR Grace M. Lavigne 973.776.8506 ASSOCIATE WEB EDITOR Corianne Egan, 862.368.4054 PUBLISHER Tony Stein 770.295.8809, SALES Cindy Cronin, Strategic Account Manager Southeast, Gulf, Canada sales, 954.551.8305 Zachary Gorman, Account Executive Northeast sales, Classifieds/Reprints/Copyrights 973.776.7820 Jennifer Mallinger, Account Executive Midwest, West Coast sales, 630.210.6827 Ria Van den Bogaert, Sales Representative Europe, Middle East sales, +32 2 569 8905 Bon Kwok, Sales Representative Asia sales, +852 31707373 Michihiro Kawahara, Sales Representative Japan sales, +81 3 3212 3671 For Magazine Subscription Customer Service: 2 Penn Plaza East, 12th Floor, Newark, N.J. 07105 973.776.8660 • 800.952.3839 CHIEF EXECUTIVE OFFICER, Gavin Carter CHIEF OPERATING OFFICER, Rhiannon James EXECUTIVE VICE PRESIDENT/CHIEF CONTENT OFFICER, Peter Tirschwell CHIEF FINANCIAL OFFICER, Ian Blackman VP, PUBLICATIONS, Amy Middlebrook VP, HUMAN RESOURCES, Cindy Mevorah GENERAL MANAGER, Julia Murphy DIRECTOR, PRODUCTION, Carmen Verenna SENIOR MARKETING MANAGER, Jesse Case Chris Brooks KANSAS CITY SOUTHERN Railway's Pat Ottensmeyer doesn't have a solution to the debilitating congestion plagu- ing the ports of Los Angeles and Long Beach, but he is making a pitch that could alleviate the pain some import- ers are feeling at the nation's largest port complex. Ottensmeyer, KCS's executive vice president and chief marketing officer, told the JOC Inland Distribu- tion Conference last month that the dominant Mexico-U.S. Class I rail operator is talking with ocean carri - ers and beneficial cargo owners about diverting shipments bound for the U.S. Gulf region away from the congestion- wracked San Pedro ports to Lazaro Cardenas in south-central Mexico. Shipping through the Mexican port would extend the supply chain to the Gulf region by two days compared to shipping through the giant Southern California port complex, Ottensmeyer said, but would be 18 to 20 percent cheaper. He noted there are eight to 10 line-item costs, including harbor maintenance taxes on imports, that BCOs wouldn't have to pay if shipping through Lazaro Cardenas. "We think the cost savings help to offset the two- day time difference it would take for goods to reach the Gulf" versus ship- ping through Los Angeles-Long Beach. With some shippers waiting more than four weeks to get their cargo off the Los Angeles-Long Beach docks and to destinations, that extra two days has to look like the sale of the cen- tury. That some shippers are willing to pay unprecedented surcharges to harbor truckers waiting in hours-long queues speaks to the desperate straits many are facing during this busiest time of the shipping season. Just how desperate are they? In a new poll of 100 BCOs, 97 per- cent — nearly unanimous — said they have been hurt by the congestion, and 65 percent say they expect the situa- tion to get worse before it gets better. Nearly three out of four said they would route cargo through other ports next year. "We ship a lot of tempera- ture-sensitive, high-value cargo, and it is just not worth the risk," one ship- per said. "We are routing everything through East Coast ports now." For many importers shipping goods in time for the upcoming holi- days, it's already too late — their goods are on the ocean or stuck at the ports. But memories of this year's conges- tion, the result of a potent cocktail of extended longshore contract negotia- tions; the introduction of new, large ships and alliances; growing cargo volumes; chassis and other equipment shortages; and rail- and drayage- related delays, will last well into next year and likely longer. Many have said the delays are the worst they've seen in at least a decade, and harken back to the 10-day lockout of dockworkers in October 2002, when 30 container ships sat in the harbor, waiting to berth and the U.S. economy took an estimated $10 billion hit. (As of last week, the backlog wasn't nearly as bad: Six container vessels were wait- ing for a berth, down from 11 in late October.) It took several years for Los Angeles- Long Beach to regain the trust of those who diverted some of their shipments to other ports. Time will tell if initia- tives such as the gray chassis pool — an equipment-sharing agreement among four lessors — starting in February will help to alleviate the pressure. But with Port Metro Vancouver having worked through its own con- gestion issues, East Coast ports largely running congestion-free less than two years before the expanded Panama Canal opens, and with newer alterna- tives such as Prince Rupert and, yes, Lazaro Cardenas beckoning, one has to wonder if many shippers with dis- cretionary cargo aren't saying, "Too little, too late." JOC Boom and Bust in LA-Long Beach The Journal of Commerce (USPS 279 – 060), ISSN 1530-7557, November 10, 2014, Volume 15, Issue No. 23. The Journal of Commerce is published bi-weekly except the last week in December (printed 26 times per year) by JOC Group Inc. 2 Penn Plaza East, 12th Floor, Newark, N.J. 07105. Subscription price: $344 a year. Periodicals postage paid at Newark, N.J., and additional mailing offices. © All rights reserved. No portion of this publication may be copied or reprinted without written permission from the publisher. POSTMASTER: Please send address changes to The Journal of Commerce, Subscription Services Department, P.O. Box 1059, Skokie, IL 60076-8059. NOVEMBER 10.2014

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