Friday, February 20, 2015

West Coast Port Slowdown -- Stories

Yesterday I discussed the escalating slowdown in West Coast cargo shipping.

Afterward, I talked to some people whose businesses involve international trade.  Their reactions were much harsher than I expected.

Here is what I learned.


A Woman Who Sources Metals for Shipment to China

"The ports are always slow, but much worse now than I ever believed possible.  Loaded containers being returned to the ports wait in unmoving lines. We have space reserved for vessels that are stranded outside the ports for weeks.

"It is virtually impossible to get containers in and out of Oakland and Los Angeles.  As these containers wait and wait and wait, cash gets hopelessly tied up.

"Also, we are unable to schedule any export cargo out of Portland or Seattle/Tacoma, period, and are forced to truck loaded containers into Canada to sail from Vancouver.

"Here's the kicker: Much of the cargo that would normally would originate in Chicago, Memphis, St. Louis, etc. and sail on vessels from West Coast ports has been re-routed to East Coast ports, causing enormous congestion there too.

"During the last 3 months, I have probably spent 60 percent of my time managing freight issues, up from approximately five to 10 percent.

"I'm on the side of the carriers here."


A Fashion Company Executive

"I don't think there's any company in the country that is not feeling this right now.

"We're a good month behind, and every day it continues, we get another week behind.  Even if it ends tomorrow, the ports will be working this off for the rest of the year.

"It's looking like spring merchandise, which is supposed to be 'springish,' is not going to get to the floor.

"We don't see any reason to think this is going to end soon.  That's just our gut feel."

The executive did not discuss financial effects on his company, but a smaller fashion firm, Perry Ellis International, reported this week that the port problem had cost it $23 million in revenues last quarter, more than 10 percent of its sales.


Food Exports

It was reported recently that poultry producers are taking losses of $30 million weekly because of the unavailability of shipping or cold storage to preserve unshipped products.

Fruit suppliers, whose prepared crops usually take 18 to 22 days to reach foreign markets, are now facing delivery times of 40 to 55 days.  There cannot be much demand for rotting fruit. 

By December, McDonald's was facing not just a shortage of French fries, all of which it sources in the U.S, but a particular shortage in Japan, where it operates 3,200 restaurants.  Because no West Coast shipping could be obtained, the company sent 1,000 tons of frozen French fries by air to Japan.

McDonald's also shipped another 1,500 tons of French fries from East Coast ports.  Tokyo is 4,185 nautical miles from Seattle; the distance from New York is 14,937 nautical miles. 


The Owner of an Oregon Company

"The longshoremen have been slow-walking the work for months now.  Everything is delayed and unreliable, two weeks to a month past scheduled ETA for the last months.  Unknown delays right now, but clearly longer.  

"We've cancelled all back orders from Asian sources for raw materials, and we're looking at local alternatives for the time being.  We also get some case goods.  These are disrupted, too.

"We've got two containers of expensive equipment waiting somewhere outside of Oakland for delivery and installation in Fresno.  This was due almost a month ago.  No betting on when it will be cleared for pick-up.  

"We've also got maybe six containers of product in limbo for the Port of Portland.

"Here in Portland, the container port has always been marginal.  It is 100 miles up the Columbia River for an extra two- or three-day turnaround.  The main customer of the port is Hanjin (a Korean shipper), with 80 percent of the container volume.  

"For the past several years, the Port of Portland has been paying Hanjin a $4 million to $6 million annual sweetener to continue calling on the port.  Despite this, there have been continuous problems with the longshoremen damaging equipment, halting work, causing all sorts of problems and delays for Hanjin.  A year or so ago, the ILWU (longshoremen) got into a battle with the IBEW (electricians union) over who should have the two existing jobs plugging in and watching refrigerated containers.  The dispute shut down the port and ultimately required the intervention of the governor to sort out.  

"This current dispute is the straw that broke the camel's back -- Hanjin just announced it will no longer stop in Portland.  The longshoremen working the container port are now out of their $150,000 jobs.  The last call will be in March.

"Obviously this means a loss of a lot of local work, but it's not necessarily as bad for us.  We'll ship into Tacoma and truck the goods down to Portland.  The trucking will cost $350 more, but the cost of getting a container to Tacoma is about $250 less than getting it to Portland. 

"If you ask me, the Pacific Maritime Association should've locked the workers out long ago.  The ILWU has gotten away with a non-strike -- shutting down operations while still getting paid!  I agree with those looking for a Reagan/PATCO type of solution."


News Reports

The West Coast ports story is a pretty big deal for businesses around the country, but it has not attracted much news coverage.  Today the New York Times reported on it, sort of, on the front of its Business section.

The theme was Chinese New Year and the frustration of merchants in New York's Chinatown who were unable to get traditional foods and products for the holiday. There were two large pictures from Chinatown and a smaller one of two ships at dock at the Port of Los Angeles.  

The headline said "New Year Delights, Still at Sea:  West Coast Port Dispute Disrupts a Holiday in America and China."  The article consisted of 24 paragraphs about the Chinatown situation and nine paragraphs about the port slowdown generally. 

In the news game, this is what is known as burying the lead.

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