What Shippers See

You’re the owner of back-to-school goods due to arrive at a U.S. West Coast port in June for delivery to retail shelves in July. If you’ve been managing cargo for a decade or more, you remember or certainly have read about the 2002 lockout of West Coast longshore workers that crippled supply chains and cost the U.S. economy billions of dollars. And if you’re a neophyte, then you need only go back a year to contentious talks on the East Coast that likewise caused disruption throughout U.S. supply chains despite the lack of an outright port shutdown.

Well, here we go again. With this month’s launch of contract negotiations between the International Longshore and Warehouse Union and West Coast waterfront employers, U.S. importers and exporters again face a dilemma: Ride out the storm, take your chances and continue to ship through any of the large West Coast ports handling the bulk of Asian imports and exports, hoping your goods aren’t caught up in a peak-season slowdown — or shutdown — or hope for the best, but plan for the worst.

According to two new shipper surveys — one by the JOC and the other by investment firm Wolfe Research — a majority of cargo owners are opting for the path of least resistance by planning to divert at least some of their goods through ports on the U.S. East or Gulf coasts or through Canada to avoid potential disruption in the run-up to a new West Coast longshore contract to replace the six-year deal that runs through June 30.

It’s another reminder of who actually controls the movement of freight: the beneficial cargo owners whom we celebrate in our Top 100 Importers and Exporters rankings.

But as we enter the backstretch of 2014, the ILWU negotiations are just one story line in what is developing as a turnkey year for supply chain interests. The Wolfe survey, broken down by Senior Editor Mark Szakonyi, is particularly illuminating in its highs and lows. Consider the following:

—   Shippers responding to the March-April survey expect same-store shipment volumes to increase 3.5 percent over the next 12 months, the highest volume expectation in the quarterly survey since the boom post-recession year of 2010.

—   Inventory levels are running moderately higher in the second quarter compared to the same period last year, yet about half of respondents expect shipping activity to increase through June, the highest percentage in the survey since 2010.

—   Rail service, disrupted so severely during the harsh winter, received its lowest grade from shippers in 10 years. As Szakonyi discusses, intermodal operators will have to restore confidence quickly to expand the domestic volumes that have led their growth for the better part of three years. That will include freeing up capacity that has constrained to some degree 75 percent of survey respondents.

—   Truckload shippers expect rates to increase 2.4 percent, net of fuel, over the next 12 months, the highest expected truckload increase in nearly two years.

—   A record number of shipper survey respondents — 38 percent — plan to shift some of their heavy freight volumes from air to ocean, extending that modal shift.

—   And perhaps the biggest takeaway is this: 71 percent of shippers responding to the Wolfe survey expect shipment volumes to grow over the next year, up from 62 percent a quarter ago.

All signs point to increasing demand. The big question now is this: Will transportation providers and a constricted infrastructure be able to handle it? 

Contact Chris Brooks at cbrooks@joc.com and follow him on Twitter: @cbrooks_joc.

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