- WHY RFGEN?
A recent labor dispute between unions and the West Coast port employers has been resolved, but the economic aftershock of the gridlock could cost the U.S. and other nations dearly. According to NBC News, the labor dispute put 29 of the nation's busiest ports out of action in February, with experts saying the gridlock could have a $2 billion-per-day impact on the economy.
Thankfully for employers, workers and the general consumer population, the worst of the dispute seems to be in the past. However, the trickle-down effect of the temporary shut down may extend beyond the last few weeks. Port of Los Angeles Executive Director Gene Seroka said it could take up to eight weeks for the port to resume normal operations again, while other industry professionals believe it could take some ports up to six months, The Wall Street Journal reported. Mayor of Long Beach, California Robert Garcia believes business should return to normal at all U.S. West Coast ports in about three months. Long Beach and Los Angeles - approximately 24 miles apart - are the two largest container ports in the U.S.
Standoff to Affect the Supply Chain?
While the jury is out on how long it will take Western U.S. ports to make up current backlog of ships and container inventory, the standoff's impact is expected to be more far-reaching than initially thought. The looming nine-month labor negotiations have given supply chain managers a reason to rethink their routes in lieu of what seemed like an inevitable standoff. According to The Wall Street Journal, supply chain managers have increasingly shifted their destinations to ports on the East Coast, Gulf Coast and in Western Mexico and Canada instead, hoping to bypass any West Coast congestion.
Roughly half of all U.S. cargo has flowed through the country's West Coast ports until recently. The re-routing trend has accelerated in recent months as many ships have lined up along the West Coast waiting for ports to resume operations. The recent standoff, coupled with the planned expansion of the Panama Canal - scheduled to complete in 2016 - could potentially divert shipping to different ports, which would impact supply chain stakeholders on the West Coast. Imports alone dropped 28 percent year over year in January, the Wall Street Journal added.
In what may come as worse news for U.S. West Coast supply chain participants, the recent congestion may impact West Coast shipping into the near future as well. A recent Journal of Commerce survey found more than 65 percent of shippers surveyed said they planned to ship less cargo through U.S. West Coast ports this year and in 2016, citing congestion delays as a primary driver for that decision. Another 65 percent of shippers said they plan to permanently reroute at least some portion of their cargo away from the West Coast because of the recent congestion.
East Coast Ports Growing
The overreach of the recent West Coast gridlock is impacting the ports' Eastern counterparts as manufacturers from East and West Asia are opting for longer routes to the U.S.'s East Coast. In fact, leasing of industrial real estate rose along the East Coast last year, including a 15 percent increase in Savannah, Georgia, where vacancy rates dipped to 5 percent in the fourth quarter, Colliers Savannah's year-end Industrial Market Report said. By comparison, the vacancy rate at the end of 2013 was more than 9 percent.
Oakland's container port lost 32 percent of imports year over year, and Seattle and Tacoma's import volume also declined more than 10 percent last year. Conversely, the Port of Virginia recorded a more than 5 percent increase in container volume, the Journal of Commerce added separately.