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Never Mind a Possible Strike. Heres the Real Problem at West Coast Ports

Importers and exporters were holding their collective breath last week, praying that negotiations for a new West Coast longshore labor contract wouldn't result in a temporary shutdown of the ports. But service providers were just as concerned about what happens if they stay open.

Never Mind a Possible Strike. Here's the Real Problem at West Coast Ports

Truckers that struggle to move containers to and from the docks are facing a frustrating and seemingly contradictory state of affairs: There’s too much marine terminal capacity on the West Coast today. And those facilities are severely congested.

Start with the overcapacity part. It wasn’t that long ago that West Coast ports were frantically building new terminals to accommodate what everyone agreed was a huge surge of demand due over the next decade. The coming Pacific Century, we were assured, would trigger massive volumes of containers from Asia, for which the West Coast would serve as the natural gateway to North American markets. Bulk terminals were demolished and replaced with container yards, and thousands of acres of bay were filled in to create the land needed to stack boxes and accommodate mile-long unit trains.

To be sure, trans-Pacific volumes rose steeply over the ensuing years. But a couple of wild cards emerged in the process. One was the Panama Canal, which offered an all-water alternative to the East and Gulf coasts, bypassing expensive intermodal services. When most linehaul containerships got too big to fit through the canal, U.S. Pacific Coast ports assumed they had won that battle – only to realize that the biggest new ships couldn’t fit into most of their facilities either. And the region’s market share began to slip.

Since 2002, the West Coast has ceded about 8 percent of market share, according to J. Christopher Lytle, executive director of the Port of Oakland. What’s more, that loss took place before the widening of the Panama Canal, a project that isn’t expected to be completed until 2016.

More recently, the West Coast has begun to recapture some lost business, but it’s no longer the sole option for shippers looking to reach consumer, agricultural and industrial markets in the eastern half of the U.S. “There’s little doubt that more shippers, particularly on the import side, will look at East and Gulf Coast alternatives,” Lytle said at the annual conference of the Agriculture Transportation Coalition (AgTC) in San Francisco. “That trend is going to continue.” Yet the construction of new and bigger marine terminals continues apace.

“When you look up and down the coast, [West Coast ports] have one thing in common – all have tremendous excess capacity,” said Lytle. Smaller facilities are being consolidated into mega-terminals to mirror the vessel space-sharing agreements among major ocean carriers.

The Middle Harbor Redevelopment project at the Port of Long Beach, combining two older terminals, will create a facility large enough to accommodate nearly all of the containers moving annually through the ports of Seattle and Tacoma, Lytle said. Los Angeles, too, “has tremendous unused capacity.”

You might think the excess of terminal space would translate into expedited handling of containers up and down the coast, but that’s far from the case. Many facilities struggle to reach average, let alone world-class, levels of productivity. While they can lift containers on and off ships at a rate that’s competitive with ports in Europe and even Asia, getting those boxes out of the facility and onto trucks or trains is another matter entirely.

The situation threatens to grow worse as West Coast container terminals shift from wheeled to grounded operations to make more efficient use of expensive dockside land. They’ll need to put away and retrieve boxes from the stacks at a rapid rate.

Automation is a key part of their strategy – Long Beach, among others, is developing terminals that use unmanned vehicles to shift containers – but there’s only so much business that ports can handle at one time. And the coming of ever-larger containerships promises to flood terminals with even more boxes, causing additional delays and forcing ships to remain in port for days at a time.

Time, of course, is money in the cargo-handling business, and shippers and drayage providers are facing higher costs due to yard congestion. Peter Schneider, vice president of TGS Transportation, Inc., painted a picture of long turn times, chassis shortages and dislocations, yard congestion, volume spikes, and the occasional labor action to protest low pay and the cost of new trucks. He termed the situation “slow steam by truck,” a reference to the controversial practice by ocean carriers of slowing down their ships to cut down on fuel burn. 

The problem got so bad at the Port of Vancouver, B.C. earlier this year that port drivers struck for four weeks to highlight their terrible working conditions. They ended up winning a 12-percent increase in pay, a doubling of the fuel surcharge and a promise by terminals to cut turn times to less than an hour. Whether operators can consistently make good on that last promise, given the volumes with which they must deal, remains to be seen.

At the ports of Los Angeles and Long Beach, which together handle some 40 percent of all U.S. containerized imports, terminal turn times can be as high as four or more hours, said Schneider. In addition, “chassis locations change daily, and information is not timely.” Throw in the stricter federal hours-of-service limitations on truck operations, and long-haul drivers are often forced to lay over for a night because they can’t pick up their containers on time.

“You should be getting out of there in a couple of hours,” said Schneider, “and that’s just not happening.”

Karen Vellutini, vice president of sales and marketing with Devine Intermodal, said the situation is made worse by the confusion over who provides chassis at the port. Most ocean carriers have divested their chassis fleets, but there’s still no central source or standard procedure for procuring the equipment. “The requirements are varied and confusing,” she said.

Avoiding a West Coast port strike is crucial, but it’s a short-term concern, and nowhere near as tough a problem as dealing with everyday conditions at marine terminals. “Service is no longer a priority,” said Vellutini. “There’s no such thing anymore.”

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