Congestion at the container terminals at Los Angeles and Long Beach ports had been almost unthinkable even a year ago, yet today it is seen as a long-term problem. The blame is put on China, the railroads, labour, big container ships and even economists. Growth at the West Coast ports has been uneven over the last few years with some ports showing strong double-digit (16-18%) growth, whilst others were losing clients (Portland). Seasonality of US imports means that Q3 is always the peak of the year. We at Global Insight forecasted that transpacific trade would grow around 15% to the US as a whole this year and at a somewhat higher rate to the West Coast. The advent of the big 7,500TEUplus container ships should not have been a surprise to anyone as they take two years to build and are limited to the routes that they can ply, so why were the lines and the terminals so unprepared when they began to arrive? Labour has been an issue for a couple of years, certainly since the port shutout which increased the diversion of ships and cargo to the all-water route via Panama.
The railroads and lack of drivers, equipment and infrastructure – nothing new here. The shipping industry, as always, takes today’s events and projects them into the future.
How easily we forget that industry adjusts over time to new conditions. The ports of Los Angeles and Long Beach suffering congestion in October had import growth of just 11% in the first nine months of 2004 vs 2003, yet over 30 containerships were waiting to berth. Lines began to divert to Oakland, with an increase of 32% year on year, or Seattle with an increase of nearly 48%. The sirens of doom suggested that congestion was with us for the long term, yet according to ci-online, by 19 November only six vessels were waiting at anchor – port diversions, more longshoremen and the end of the Q3 Christmas shipment surge had dealt with the rest. The Pacific Maritime Association (PMA) issued a statement that operations have now returned to normal. So, looking back over the last six months we can say to ourselves, what was all the fuss about, and get back to normal.
But is that right? Have we not learnt the lesson that this was by and large a failure in planning by many of the protagonists in the business? There was no coordinated action plan within the industry to deal with the advent of the large ships, the China phenomenon and the projected double-digit growth in trade.
Traditionally ports’ forecasts of cargo demand would be used to calculate capacity needs in terms of land and labour with little allowance made for a ‘what-if ‘ scenario of unabated growth with the peaks in cargo resulting from ships arriving that were 50% larger than hitherto.
Did we see a similar growth in port and terminal equipment and labour to handle the larger ships and the arrival of 5,000 containers on a weekly service? I would suggest that at the end of the day, the problem lies with planning between the stack and the gate (notwithstanding the separate issues related to the railroads).
Ben Hackett is executive managing director of Global Insight, Inc. (www. globalinsight. com), formed to bring together two respected economic and financial information companies, DRI and WEFA. Global Insight provides a comprehensive economic and financial coverage of countries, regions, industries and markets using a combination of expertise, models, data and software within a common analytical framework to support planning and decision-making.