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Long-Term Effects of West Coast Port Congestion
Long-Term Effects of West Coast Port Congestion
Although a tentative agreement has been reached between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) on February 20, 2015, the effects of the negotiations and slow downs are still ongoing. Both sides have committed to clearing up the backlogs, but many issues still remain. Shippers are skeptical that the coast productivity will return to normal. Multiple challenges are unresolved such as chassis shortages, ever-larger vessels, and ILWU inflexibility.
Higher transportation costs
Intermodal and truck rates are expected to rise sharply this spring as shippers seek capacity to move containers that have been stranded at ports for weeks. Trucking companies are already working to expedite delayed cargo, often at higher prices, and shippers are incurring the extra expense of rerouting freight or changing suppliers and modes. Reddaway, a Western regional LTL carrier, reported expedited trucking requests were up 10 percent year-over-year from November through February, which the company attributed to port congestion. This trend is expected to continue and a new service has been added to move freight inland faster. In addition, ocean spot rates from Asia to the U.S. East Coast were almost double from this time last year. Spot rates to the West Coast are up 10 percent. The congestion and lingering effects are costing importers and exporters millions of dollars.
Permanent Increased use of U.S. East, Gulf and Canadian Ports
The most significant result may be the permanent shift away from U.S. West Coast ports to the U.S. East Coast, Gulf, and Canadian Ports. A recent JOC.com survey of 138 shippers found that 65 percent said they plan to permanently ship less cargo through the U.S. West Coast ports because of the congestion delays. The U.S. East Coast ports are expected to continue to receive most of the diverted cargo. Nearly 39 percent of the respondents reported that they will reroute ships to the East Coast, followed by 16 percent to the U.S. Gulf Coast ports, and 15 percent to Canadian ports. There is precedence for this kind of monumental shift. The same pattern took place in 2002 during another round of ILWU-PMA contract talks that led to a ten day lock out. Shippers diverted their cargo through the Panama Canal to the East Coast and many did not return after the contract was settled.
Written by: Shannon McCormick-Grubbs
If you would like additional information on how this may affect your freight or if you have any other supply chain questions, please contact Allyn at (239) 489-9900 or you can email us at sales@allynintl.com.
Articles Cited:
65 percent of shippers in JOC survey say they’ll divert from West Coast
Shippers warned to brace for ‘freight storm’ when West Coast logjam breaks
http://www.joc.com/search/gss/shippers%20warned%20to%20brace%20for%20freight%20storm
Lingering congestion dims trans-Pacific trade outlook