Commentary: Moving On

For what seemed like months, we read nothing but the updates to the ILA-management drama playing out on the U.S. East and Gulf coasts. Votes to authorize a strike if a labor contract was not reached by Sept. 30 caught the headlines of industry, and some non-industry, publications. As did the early termination of negotiating sessions after only a few minutes of talks about work rules.

Now that the International Longshoremen’s Association and United States Maritime Alliance have agreed to a 90-day contract extension and will resume meetings this month, the hubbub seems a little anti-climactic.

A strike would have had very serious repercussions and a heavy impact on the economy. The last waterfront strike, in 2002 on the U.S. West Coast, came at a cost of hundreds of millions — some even saying in the billions — of dollars. Yet several entities recently questioned the $1,000 congestion surcharge some carriers planned to implement in the event an ILA strike occurred, saying it was adding to the profitability of the carriers — what profitability?

Is there a thought process that says when vessels don’t move, there are no costs involved?

All of that aside, here is hoping the extended time frame will allow substantive discussions on critical issues from both labor and management, and a lot less boisterous rhetoric.

As the East Coast labor stress eased, a rather historical event was marked on the West Coast at the Port of Oakland. And this was not subject to much publicity.

One hundred former employees of Sea-Land Service gathered in San Roman, Calif., to celebrate the 50th anniversary of the first container ship call at the Port of Oakland.

In September 1962, a mighty vessel capable of carrying 267 35-foot containers (what are those, many will ask) stopped in the Port of Oakland for the first time, in what was then an intercoastal service moving cargoes from the U.S. East Coast through the Panama Canal to the West Coast and back, later also stopping in Puerto Rico. Thus began Oakland’s entry into the containerized world.

Besides the size of the vessel being notable in today’s frame of reference, the containers on board were built in Fremont, Calif., at the Fruehauf Trailer plant, as were the chassis used at the port to facilitate the operations.

My, how the world has changed in those 50 years; the containerization of general cargo on a global basis is certainly representative of many other technological changes that have occurred in that time frame.

Only a few of those present in Oakland 50 years ago were at the luncheon last week; think of what they have witnessed in their professional lives in watching a fledgling industry develop into a multibillion-dollar-a-year industry. And think of the impact containerization has had on global trade. They were the brainchildren that got it all started.

I made a fleeting reference to some who recently questioned the validity of the congestion surcharge filed by the ocean carriers. I suppose that many feel it is their job to “protect” their company from any financial burden; fair enough. But it really points out again a couple of other fundamental issues that are becoming harsh realities to some, especially those who are not the really big movers of cargo; namely, that there is a pecking order of who gets what from carriers.

From rate levels, to equipment and space allocations, to contracted refunds, it is a tilted world becoming more tilted with the passing of time. In the 1990s, the Top 20 container carriers carried less than 50 percent of the world’s containerized cargo. Today, 68 percent of the world’s container trade is carried by the Top 10 carriers — and that number is climbing — another tilting of the global cargo movements.

As in most industries in the world, containerized shipping has become very advantageous to the big; those who can buy large quantities from factories get larger discounts than small purchasers of the same product. Those who ship tens or hundreds of thousands of containers get similar significant benefits from carriers versus their smaller counterparts.

No longer are we in a “common carrier” world, a level playing field for all. That went by the wayside with the passage of the Ocean Shipping Reform Act. Yet many are quoted today as though that still were the case, even the Federal Maritime Commission chairman. We still see people questioning a charge such as a fuel surcharge, saying it doesn’t reflect costs. Do rates and charges reflect costs? Not really, or else we wouldn’t see those negative numbers being turned in by carriers.

It has to go both ways. If carriers are not recovering costs with their rates and charges today, fees will have to be raised at some point. I’m sure we will hear about that.  

Gary Ferrulli, a veteran of nearly 40 years in the shipping industry, is director of export carrier relations for non-vessel-operating common carrier Ocean World Lines, a subsidiary of Pacer International. Contact him at mrgtf4811@mindspring.com. The views expressed here are his own and do not necessarily reflect those of OWL.

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