The number of cargo containers arriving at US ports is expected to be higher than than normal for this time of year due to retailers stocking up on inventory in anticipation of a breakdown in talks between West Coast port workers and port operators, according to a new report.
The Port Tracker report, which is compiled by the National Retail Federation and the consulting group Hackett Associates, looks at the number of cargo containers arriving at US ports each month. June volumes were projected to increase 7.5% due to retailers bringin in higher than normal amounts of merchandise.
Deadline Looms
The deadline for a new contract between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association, which represents port owners, will expire June 30.
If dock workers vote to go on strike, there could be a repeat of the cargo disruptions that occurred in 2002, when a strike shut down West Coast ports for 10 days, creating a backlog that took several months to be cleared. That disruption cost the US economy an estimated $15 billion in reported losses.
Ports Handle Most Asian Imports
West Coast ports handle more than two-thirds of all US retail container cargo and most of the cargo arriving from Asia. While an expansion of the Panama Canal is expected to open up East Coast ports to the Panamax super-freighter cargo ships that commonly are used for Asian imports, the deepening and widening of the canal won’t be finished until later this year.
In the meantime, retailers are nervous and are stocking up on inventory, according to Jonathan Gold, vice president for supply chain and customs policy for the National Retail Federation.
“We don’t want to see disruptions at the ports but retailers are making sure they are prepared in case that happens,” Gold told Logistics Management. “Whether it’s bringing cargo in early or other contingency plans, retailers will keep the shelves stocked for the back-to-school and holiday seasons.”
Retailers Weighing Their Options
Retailers are considering many different options in case the talks go beyond the June 30 deadline. While one option is to ship early so there is sufficient inventory on hand, that comes with the added cost of warehousing the inventory stateside until it is ready to be used.
Another option is to shift cargo that normally arrives on the West Coast to East Coast and Gulf ports, as well as to ports in Canada and Mexico. But that takes longer because container ships from Asia have to pass through the Suez Canal in Egypt — which connects the Mediterranean with the Red Sea — at least until the wider Panama Canals opens. For last minute orders, air cargo could be used, although that is substantially more expensive than shipping in cargo containers.
Ben Hackett, founder of Hackett Associates and author of the report, said it’s likely that retailers will continue to make backup plans in anticipation of a dock worker walkout.
“The West Coast port negotiations are likely to keep inventories higher than they normally would be,” Hackett said. “And in recent months there likely has been a shift to all-water routes via the Suez Canal to the East Coast due to the uncertainty out west at this point.”