With a week remaining until its contract with the International Longshore and Warehouse Union expires, the group representing employers in negotiations, the Pacific Maritime Association, has released a study that cautions, "Should terminal charges at the West Coast ports increase as the result
of the contract negotiations in 2014, the competitive logistics position
of the West Coast ports will be eroded.”
The report, prepared for the PMA by the Lancaster, Penn.-based firm Martin Associates, also warns that "any disruption in the operation of these ports would have a significant impact, not only nationally, but on the individual states in which they are located.” Martin is well known for preparing reports on the economic impact of ports and port-improvement projects.
Dated April 30, 2014, there is little in the report that would startle the shipping community, but the timing of its release during the late stages of the contract negotiations may be designed to make the wider world aware of what is at stake in the talks and perhaps bolster the bargaining power of the PMA, which represents terminals and shipping companies in the ILWU negotiations.
The current six-year contract between the ILWU and PMA expires at the end of this month. Both sides have said for months that the negotiations on a new contract may continue into July.
The report says that while cargo and associated vessel activity supports 128,842 jobs at individual ports, the cargo handled at the ports have a much wider impact — nearly 9.2 million jobs throughout the United States.
A breakdown in negotiations between the PMA and ILWU in 2002, which led to a 10-day shutdown at West Coast ports, “had a major impact on the logistics supply chain decisions of key importers and exporters … and any disruptions of service at these ports in the future will likely have a similar structural impact, in turn eroding the economic importance of these ports to the states in which they are located, as well as to the national economy,” Martin Associates said.
The market share of West Coast ports of containerized imports fell from 50 percent in 2002 to about 43.5 percent by 2013, and the report attributed the decision of shippers to diversify their use of ports not only to the 2002 work stoppage, but the 9/11 terrorist attacks and “congestion issues in 2004 due to rail meltdowns at the San Pedro ports.”
In addition, some carriers have increased Suez routings from Asia to the U.S. East Coast using large, fuel-efficient ships.
West Coast ports as well as railroads and trucking companies are aware of the competition from all-water services, and the report states that truck and rail service at West Coast ports has improved, that intermodal rates are more competitive, and that “growth of environmental policies and infrastructure fees at West Coast ports has stabilized.”
It notes terminals in Los Angeles and Long Beach are investing to increase efficiency and capacity to protect market share after the expansion of the Panama Canal and said “in the absence of a disruption of service at the West Coast ports, increases in terminal charges at these ports and increase in intermodal rates, it is not likely that the erosion of West Coast container market share will continue at the same rate since 2002.”