During one of my regular trip to Los Angeles last week, I had the chance to observe firsthand the grim situation of the LA ports and how dysfunctional the overall operations are at the moment. Meeting with the trucking companies, it was very clear to read their frustration as they deal this on a day to day basis.
The congestion in LA-Long Beach has been building for months. Many operational and labor-relations factors are piling on each other and causing the worst port congestion since the employer lockout of the International Longshore Warehouse Union (ILWU) in the 2002 contract negotiations.
Currently there are many vessels anchored off Los Angeles just to approach to terminals to start working. The terminals are not even able to handle what they already have. Container yards are congested. The additional container storage areas are already full and some steamship lines are using the trucking companies’ yards as a storage place. When in the past the regular turn over time for a truck was 3 moves per day, this was reduced to 1.5 moves. It takes hours just to get in the terminal, hours to find a chassis and by the time the container is out the day is already over.
According to the latest survey by Journal of Commerce (JOC), 97 percent of shippers say they have been hurt by congestion at the ports of Los Angeles and Long Beach. Of the slightly more than 100 shippers surveyed from 65 percent expect congestion to only get worse. Half of the shippers seeing their containers sit on average at the LA-LB terminals between five and 10 days. About 12 percent of shippers are seeing their containers sit at the terminal for one to five days, while 33 percent of those surveyed have containers waiting for pickup more than 10 days.
Intermodal movements routed via Los Angeles ports are not any better. We have witnessed containers sat at the terminal waiting up to 3 weeks just to move to rail to go to inland destinations. West Coast is the largest gate for the US and especially for Asia imports, there is not much option for time sensitive goods such as ready-made garments, electronics and other seasonal consumer goods. Canadian ports can handle only so much and with pressure they will be in the similar condition. So there is no easy solution such as “just diverting the cargo to another port”.
There are many reasons that are contributing the congestions at the terminals. To list them shortly:
1-Trucker shortage: There is nationwide trucker shortage going on. Many owner operated truckers prefer not to handle the drayage business as it has become less profitable
2-Clean truck program: Although the clean truck program started with good intentions it had terrible effects on truckers. Many of the companies could not afford to invest in a new truck which costs around $125 K+ and therefore exited the industry which is the major reason of the trucker shortage.
3-Lack of contract for International Long shore and Warehouse Union at some certain terminals: although there was no strike terminal wide slowdowns are going on.
4-Chassis shortage: Steamship lines transferred the chassis management to private leasing companies after losing millions of dollars trying to manage the equipment. Currently 4 companies control %95 of the chassis at Los Angeles and Long beach ports. There are simply not enough chassis to meet the demand.
Above are the major reasons. One of the other reasons is the increasing size of the vessels that serve the transpacific trade which requires longer times at berth.
OK, so any relief in sight? Not in near future really.
The terminals are expected to go back to their normal operations during Chinese New Year in 2015 where there will be less inbound containers. Also the four companies that control about 95 percent of the chassis at Los Angeles-Long Beach agreed recently to develop a neutral or gray chassis pool which is expected to begin on Feb. 1, 2015. This will ease one of the major problems that are contributing the current problem. The contract negotiations must be finalized at once. The longshoremen who are qualified to operate the yard equipment must be put in training to bring additional power to terminals.
This is not a local problem. The worst is not over yet and we will see its effect on the overall US economy during this busiest time of the year for retail industry and also for agricultural exports.