Commentary: A Ho-Hum Peak Season Coming Up

Get ready for another boring peak season. If industry analysts are correct, imports from Asia will increase modestly. That means freight rates will remain low, at least for beneficial cargo owners. Ports will accommodate the temporary spike in container volume without experiencing any congestion. There should be sufficient intermodal rail and harbor trucking capacity. In other words, we should see a repeat of peak season 2011.

Yes, some participants in the supply chain will experience more excitement than they’d like. Shipping lines this spring signed service contracts with retailers and large importers containing only the slightest rate increases over 2011. Some of the contracts with beneficial cargo owners specify there will be no peak-season surcharge. Because they’re strapped for cash, shipping lines are shifting the burden to NVOs and 3PLs that play the spot market. The Drewry Container Rate Benchmark for shipping a 40-foot container from Hong Kong to Los Angeles during the week of June 11 was $2,700, up 20 percent from the previous week. That was the fourth rate increase for NVOs since Jan. 1.

Harbor truckers will have to deal with productivity issues at some marine terminals, especially during September and October. Although physical capacity isn’t a problem, those who don’t increase their hours or employ sufficient longshore labor when container volumes spike will force unnecessary delays upon harbor truckers.

For those who really crave excitement during the peak season, there may be some developments to keep an eye on. The exit of carriers from the chassis business could produce chassis dislocations and spot shortages. As equipment providers direct truckers to cart chassis all over the harbor in order to keep chassis pools balanced, driver productivity will drop and tension between the harbor trucking companies and shipping lines will increase.

A good labor dispute always adds excitement to the peak season, and there is a possibility of two disputes this year. International Longshoremen’s Association President Harold Daggett continues to talk trash about employers on the East and Gulf coasts, and United States Maritime Alliance Chairman and CEO James Capo has accused the ILA of refusing to bargain in good faith. With the current ILA contract set to expire on Sept. 30, a peak-season fiasco at East and Gulf Coast ports isn’t out of the question.

In Southern California, the Office Clerical Unit of International Longshore and Warehouse Union Local 63 has been working without a contract for two years. The way negotiations have been going, another two years of zero progress is certainly possible. What makes this situation potentially exciting is that the coast arbitrator recently ruled ILWU dockworkers could honor an OCU picket. A shutdown of the nation’s largest port complex is at least legally permissible now.

Nevertheless, these doomsday scenarios seem remote, so peak season 2012 is shaping up to be totally unremarkable.

Contact Bill Mongelluzzo at bmongelluzzo@joc.com. Follow him on Twitter @billmongelluzzo.