Fight for survival

Operations at the 29 US West Coast ports have sky-rocketed since the announcement, but this is no quick fix. Dozens of ships are anchored off ports up and down the coast and even the most optimistic forecasters expect it will take months to clear the backlog. The gash in the US economy will take even longer to heal: Deutsche Bank analysts have estimated that the slowdown could shave up to 1% off first quarter GDP.

Contingency plans remain in place for many shippers who are finding it hard to put their faith back in such a tired system. For some reefer operators cargoes have spoilt, while some automotive companies have switched to air freight – at huge additional cost – to meet commitments.

Drewry’s Neil Davidson warns that some shippers, having been forced to switch to the more expensive Asia-USEC route via Suez, may opt to keep some services on this route which will push rates down and make it harder for USWC ports to win back lost volume. “The USWC ports will face real challenges going forwards, both in terms of regaining confidence, and in terms of the relative price competitiveness of alternative routes,” he says.

In the nine months that it has taken to reach an agreement there have been casualties, the loss of Hanjin up in the Portland being the most high profile. Port volumes are down and not all of it can be recovered. The Port of Los Angeles, the nation’s busiest, handled 29% less cargo in January 2015 compared with January 2014, and volumes were down 19% in neighbouring Long Beach, the second-busiest.

To top it all, West Coast ports cannot count their chickens just yet as dockworkers still have to vote on the contract, all 20,000 of them.

But long term, fundamental problems remain and we can expect the same dramas in 2019, when the existing contract comes up for renewal again. Will lessons have been learnt, or will West Coast ports face the same showdown in four years time? The need for increased automation certainly won’t have lessened by then. And 20,000 teu ships may even be considered second tier ships by 2019.

Bigger ships bring bigger problems for US West Coast ports, problems that cannot be solved by the new labour agreement. And then there’s the continuing chassis shortage challenge, the lack of truckers and intermodal capacity issues.

While the temptation will be to ease off once the backlog is cleared, US West Coast ports still have a lot of work to do. The labour agreement is just round one of what could ultimately prove to be a fight for survival.