In a move that some observers say may be a sign that the looming strike by West Coast longshoreman may be avoidable, a consortium of container shipping lines announced that it is moving ahead with a planned rate hike.
The Transpacific Stabilization Agreement — which includes container lines that move cargo between Asia and West Coast ports — announced in a news release that it would be moving ahead with the second phase of a revenue recovery plan. The move would include a $200 per 40-foot container general rate increase and peak season surcharge for cargo moving to the Pacific Southwest ports in California.
Second Increase in as Many Months
The increase comes in the wake of a similar rate hike implemented July 1, when a $400 per 40-foot-container increase was implemented for cargo moving to ports in the Pacific Northwest, the Eastern seaboard and the Gulf Coasts, as well as via intermodal routes to inland US destinations.
But the TSA is taking it one step further by recommending another general rate increase for August 1. The move comes as a result of the currently unsustainable freight levels overall and the likelihood of strong demand through August.
Brian Conrad, TSA’s executive administrator, said that means the shippers are fairly confident that a strike by dockworkers can be avoided.
“With the overall uncertainty already seen in the eastbound friend market, the central issue for shippers and carriers alike is maintaining service and schedule reliability,” Conrad told Logistics Management. “All partners in the supply chain need to be able to respond quickly and cover contingencies in the event of cargo surges or bottlenecks. And they need to know that their costs are covered inthe process.
Contract Already Expired
The deadline for a new contract between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association, which represents port owners, expired June 30. But both sides have publicly declared that they are committed to avoiding the type of 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.
The two sides issued a joint statement after the old contract expired: “While there will be no contract extension, cargo will keep moving, and normal operations will continue at all ports until an agreement can be reached between the Pacific Maritime Association (PMA) and ILWU.”
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.
The ILWU, which represents 14,000 port workers at 29 ports from San Diego to Seattle, has threatened to go on strike if a new agreement can’t be reached. The last work stoppage, which occurred in 2002, lasted 10 days and caused an estimated $15 billion in reported losses and created a backlog of cargo that took several months to be cleared.
Work Stoppage Could Harm Economy
If a strike occurs this year, one of the biggest sectors that could be affected is the import auto industry. While more than 40% of the nation’s imports come through the West Coast, close to 100% of the vehicles manufactured in factories in Japan, Korea and other Asian countries arrive there.
More than 2.4 million vehicles per year are exported to the US from Asia, most of which come through the Long Beach, Oakland and Seattle-Tacoma ports. The West Coast ports also are the destination for many different vehicle components, including engines, transmissions, and tires that are manufactured in China, South Korea and Japan and are used at assembly plants throughout North America.