U.S. West Coast Ports Working Through Cargo Increase
Almost nine months of contentious labor contract talks are over, but a tentative agreement still has to be ratified and a consensus of observers and analysts say it’s going to take months for the flow of cargo moving through U.S. West Coast ports to normalize.
It’s a thorny situation that’s expected to get worse before it gets better, as the import cargo volume at the nation’s major retail container ports is expected to rise an unusually high 16.9 percent this month over the same time last year, according to the monthly Global Port Tracker report released today by the National Retail Federation (NRF).
“Importers and exporters are reviewing their supply chain plans for the future, and not necessarily in favor of the West Coast,” said Ben Hackett of Hackett Associates, co-publisher of the report. “But, looking on the practical side, a number of factors favor a return to the West Coast.”
Hackett said sending ships from Asia to the East Coast “is more expensive than the West Coast, takes longer, and results in higher expenses to move the cargo to Midwest distribution centers by rail. In addition, importers have significant investments in West Coast distribution centers that would not easily be abandoned.”
At this point, “retailers’ immediate priority is to make sure spring merchandise reaches store shelves in time,” says Jonathan Gold, vice president for Supply Chain and Customs Policy at the Washington, D.C.-headquartered NRF. “Going forward, we want labor, management and Washington to work together to see that we never again have a situation like what we went through these past several months.”
The major U.S. container ports covered by the report handled 1.24 million TEUs (20-foot equivalent units) in January, the latest month for which after-the-fact numbers are available. That was down 13.4 percent from December following the end of the holiday season and down 9.5 percent from January 2014.
February was estimated at 1.27 million TEUs, up 2.3 percent from 2014. March is forecast at 1.52 million TEU as spring merchandise arrives, up 16.9 percent from last year.
The March number is high both because of the backlog of ships at anchor waiting to be unloaded and because the annual Lunar New Year shutdown of Chinese factories was later this year, delaying some February cargo into March. April is forecast at 1.51 million TEUs, up 5.2 percent; May at 1.57 million TEUs, up 6.1 percent; June also at 1.57 million TEUs, up 6 percent, and July at 1.6 million TEUs, up 6.7 percent.
The first half of 2015 is forecast at 8.7 million TEUs, an increase of 4.5 percent over the same period last year. Congestion at West Coast ports has prompted many importers to shift their cargo elsewhere, creating speculation on how long the shift might last.
West Coast ports handled 55 percent of cargo this January, down from 64 percent during the same month in 2014, while East Coast ports handled 45 percent, up from 36 percent.
A Lesson in Hedging