Commentary: Raising the TPM Curtain

Last week, my JOC colleagues and I unveiled the agenda for the March 2-6, 2013, TPM conference in Long Beach. The major themes we’re seeing play out in the industry this year and likely next year as well are reflected in the agenda: U.S. longshore labor relations, shippers’ determination to rein in costs, carriers’ determination to achieve profitability, the impact of mega-vessels, and the shaky-at-best global economy.

Soren Skou, the Maersk Line CEO who promptly set a tone of intolerance for losses upon his ascension to the role at the beginning of this year, will be TPM’s opening keynote speaker. We intentionally sought out Skou for this key spot on the program, not simply because he runs the largest container carrier, but because he has breathed new life into an elusive concept for carriers — that profitability isn’t a matter of luck or something that occurs on rare occasions when supply and demand swings in the carriers’ favor, but rather can be willed into existence by thinking differently.

Time will tell whether this vision is a fantasy or a harbinger — the nearly 40 percent decline in Asia-Europe rates since late June isn’t encouraging — but the increases achieved on the major east-west trades earlier in the year prompted analysts on several occasions to note, occasionally with some surprise, a greater sense of discipline coming from the carriers.

In other words, it hasn’t just been rhetoric to the effect that rates are “unsustainable” and “have to” go up — words that mean nothing without actions behind them. Actions have been part of the carriers’ orientation this year. They have been quicker to withdraw capacity, are shortening the length of charters to facilitate quick reductions in capacity, are expanding slow-steaming, and, at least publicly, are expressing satisfaction with current levels of market share.

We invited Skou to lead off TPM because we believe he deserves credit for pointing the industry in this direction after a disastrous 2011. As shippers have said on many occasions, they want carriers profitable and rates stable. The industry isn’t concentrated to the point that there is obvious price leadership, but leadership in the form of consistent messaging from the world’s largest carrier makes a difference. The picture will have changed by next March. Carriers either did or didn’t withdraw enough capacity this fall to prevent a bloodbath, and what happens this fall will set the stage for 2013 and what Skou has to tell us in Long Beach.

The agenda also will include expanded coverage of the U.S. longshore picture, with the basic idea that, given the inherent unpredictability and ongoing issues, dockworker labor is a factor that must be front and center in any supply chain. The industry got a rude wakeup call at this past March’s TPM event, with the clear message that East and Gulf Coast labor peace in place for a quarter century no longer can be taken for granted. Subsequent events leading up to the three-month extension of the ILA-USMX contract until Dec. 29 only reinforce that reality.

As we head into 2013, the industry will be dealing — hopefully — with the aftermath of the East and Gulf Coast scenario that dominated the news this year, but attention will be shifting to the West Coast and the June 2014 expiration of the agreement between the International Longshore and Warehouse Union and the Pacific Maritime Association. At TPM, we’ll preview these negotiations, which could be equally unpredictable, and that’s the point.

Many argued earlier this year that with all the ILA stands to lose through labor unrest, specifically its larger share of the U.S. container pie and the possibility for even more once the Panama Canal is expanded in 2015, the union leadership would have kept the negotiations low-key. But that didn’t happen.

On the West Coast, the ILWU also arguably has much to lose, facing competition on three fronts simultaneously: Canada, Mexico and the East Coast. But it’s anyone’s guess whether that will mean anything in the heat of negotiations.

TPM also will focus on the bigger context to these longshore issues. For example, a factor that has inflamed longshore tensions this year, not just on the East and Gulf coasts but especially in ports such as Longview, Wash., and Portland and Coos Bay, Ore., is jurisdiction; longshore unions see automation and job losses on the horizon and want to keep other unions off the docks. In doing so, they are being met with an unfriendly reaction from the AFL-CIO and the National Labor Relations Board, which ruled against the ILWU in the Portland dispute over two reefer jobs held for years by members of the International Brotherhood of Electrical Workers.

Other issues on the TPM docket include big ships, lowering transportation costs, ocean carbon footprints, freight rates and intermodal. My colleagues and I welcome any comments on the agenda.

Peter Tirschwell is senior vice president of strategy at UBM Global Trade. Contact him at ptirschwell@joc.com, and follow him at twitter.com/PeterTirschwell.

 

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