Published on JOC (http://www.joc.com)

JOC › Port News › Longshoreman Labor › International Longshore and Warehouse Union

Bill Mongelluzzo, Senior Editor | May 14, 2014 4:46PM EDT

Two-thirds of shippers who participated in a JOC survey this week plan to divert at least some cargo away from U.S. West Coast ports to avoid disruption that could emerge from contract negotiations between the International Longshore and Warehouse Union and West Coast employers.

Negotiations began on May 12 to replace the current six-year contract, which expires at 5:00 PM on July 1. The risk of a strike,lockout or other form of disruption is greatest during times of waterfront contract negotiations, and thus these are the times when cargo interests take precautionary action to avoid ports that might be affected. They did the same thing two years ago during contentious East and Gulf coast negotiations between employers and the International Longshoremen’s Association.

Fully 66 percent of 221 shippers that responded to the survey, conducted from May 12-14, will divert at least some of their cargo through non-West Coast ports. Of those that are diverting, 73 percent will ship through East or Gulf Coast ports, 25 percent will ship through Canadian ports and 2 percent through Mexico.

Of those shippers that plan to use other ports, 29 percent said they will divert less than 10 percent of their total cargo volume, 31 percent will divert 10 to 25 percent and 40 percent will divert more than 25 percent of their volume.

For many shippers, the locations of their distribution centers in the U.S., or related logistics

JOC Survey Results

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factors, make it difficult to divert. Some 42 percent said they have no viable alternatives to West Coast ports, while 25 percent said it is too costly and 8 percent said it is too late now to divert.

If comments filed anonymously by respondents are an indication as to how shippers are planning their supply chains to avoid the negotiations, it appears that ports will be busier than usual next month because many shippers are moving goods earlier.

A number of responses included comments such as “pulling orders forward early into June,” “asking customers to carry more inventory” or “ordered heavy to have goods arrive early.”

Respondents who are diverting cargo indicated they learned a difficult lesson from the 10-day employer lockout during the 2002 negotiations so they made plans early this time to divert cargo. However, some importers said their supply-chain logistics dictate against diversion.

There is evidence that diversions at least to the U.S. East Coast are already under way. Carriers report all-water services to the U.S. East Coast are sailing at close to capacity. Spot rates from Shanghai to the U.S. East Coast are up 5.2 percent versus a year ago, while rates from Shanghai to the U.S. West Coast are down 4.5 percent, according to the latest Shanghai Containerized Freight Index data.

“To divert major volumes would be futile and way too costly,” one respondent said.

A number of respondents referred to predictions by experts at the JOC’s TPM conference in March in Long Beach that a contract will be reached this summer without a work stoppage.

In a joint statement when negotiations began on May 12, the ILWU and PMA said they both “expect cargo to keep moving until an agreement is reached.”

On the other hand, shippers do not anticipate that the contract negotiations will be driven by what is best for cargo interests. Asked in the survey whether their needs are being adequately addressed in the negotiations, 81 percent said, “No.”

Contact Bill Mongelluzzo at bmongelluzzo@joc.com and follow him on Twitter: @billmongelluzzo.

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Source URL: http://www.joc.com/port-news/longshoreman-labor/international-longshore-and-warehouse-union/joc-survey-suggests-widespread-diversions-due-ilwu-talks_20140514.html

Page 2 of 2JOC Survey Suggests Widespread Diversions Due to ILWU Talks

5/15/2014http://www.joc.com/print/2753196