Lack of surge capacity could magnify West Coast port disruption
North American supply chains will be strongly affected over the next three months by the negotiations for a new contract between the International Longshore and Warehouse Union and employers, said Noël Perry, managing director and senior consultant at FTR.
Writing in FTR's "State of Freight Today" newsletter, Perry said while most observers do not expect an extended strike, the bargaining talks are expected to be difficult. Rather than a strike, he thinks it is "more likely the longshoremen will stress the market through a collection of job slowdown tactics, until port operators and shippers suffer enough to make concessions."
The 12 million container lifts moving through West Coast ports are a "big deal" noted Perry, and "equate to about 26 million truck movements and about 5.1 million intermodal moves. These moves account for about 2 percent of total U.S. dry van truck activity, about 40 percent of intermodal activity, and about 43 percent of container port activity."
With shippers "moving up their orders and shifting routing," he said, "Intermodal Association of North America data indicates that movements of international containers on rail were up over 11.5 percent year-over-year in April" and a recent survey found two-thirds of international container shippers were contemplating moving a portion of their West Coast volumes through other ports.
He said ports in the Northeast will have trouble handing such a big shift in volume because they are already congested and because they have seen a decline in productivity because of the switch by ocean carriers to bigger ships, which results in concentration of activity on some days and little activity on others.
"This leads to congestion and reduced capacity utilization in fixed facilities and drayage trucks," Perry said, adding that the shift by the steamship lines away from supplying chassis has been problematic, with spot shortages with equipment hoarding by truckers is already occurring. He also said the driver shortage has hit the port drayage market very hard.
Railroads are also troubled by the uneven daily volumes coming out of Northeast ports from barge ships and inland drayage operators are having the same drayage problems as in the Northeast.
"This predicament reminds us of what we have learned about the overall trucking market. Fifteen years of difficult conditions have stripped the market of its surge capacity, the kind of buffer
that mitigated problems in the past. Until shippers become willing, again, to fund surge capacity, they will suffer when the market is stressed by any outside force that demands extra capacity: bad
weather, new regulations, sudden growth – or contentious contract negotiations on the West Coast," he said.
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