California’s largest container ports are working hard to protect their market share in the trans-Pacific trade, but their toughest challenge isn’t competition from other ports. Rather, it is overcoming the perception the state is unfriendly to business and that its ports are shackled with oppressive environmental restrictions and an unreliable labor force.
California’s ports handle about 40 percent of the U.S. container trade — all told, U.S. ports handled 28.4 million 20-foot equivalent container units last year, up from 25.4 million TEUs in 2009. Los Angeles, the nation’s largest port, handled 5.8 million TEUs in 2010, up 7.4 percent from 2009. Through the first four months of 2011, that rate of growth has increased to 11.8 percent, with year-to-date volume reaching 1.9 million TEUs from 1.7 million TEUs.
In Long Beach, 2010 volume of 4.7 million TEUs was up 21 percent year-over-year, and January-April 2011 volume of 1.5 million TEUs was up 6.6 percent.
To support that volume, the ports and the transportation providers serving Southern California have developed a network of marine terminals, intermodal rail connections, harbor drayage services and distribution warehouses unmatched in the country.
But “climate and cache” won’t prevent cargo diversion if importers and exporters perceive California’s environmental regulations as excessive and the ports subject to labor actions, said Karen Vellutini, vice president of sales and marketing at West Sacramento-based motor carrier Devine Intermodal.
Addressing this month’s California Maritime Leadership Symposium in Sacramento, Vellutini cited as examples of an unfriendly business climate the nation’s strictest carbon emissions law and a job action last month in which longshoremen shut down the Port of Oakland to express solidarity with the public service workers in Wisconsin who lost their collective bargaining rights.
Not everyone agrees the reputation is deserved. Speaking at the same event, Richard Dines, president of the Southern California District Council of the International Longshore and Workers Union, said that union’s militant reputation is misguided. Recent history, he said, shows the ILWU is a collaborative partner with the West Coast maritime industry, and, like the ports, the goal of most ILWU members isn’t only to prevent cargo diversion to other ports, but to regain the market share lost to East and Gulf Coast ports in recent years, particularly since the 2002 lockout that shut down West Coast ports for 10 days.
“The ILWU is a skilled work force that understands the need to keep California competitive,” Dines said. The key to that competitiveness, he added, is to increase the speed and reliability of cargo movement through the ports. To do that, however, requires modern transportation infrastructure and technology.
“Good technology will create jobs, not eliminate jobs,” Dines said, indicating, contrary to conventional wisdom, the ILWU will stand behind new technology.
But Vellutini points to another disadvantage for California’s ports: They lack the community support often found in other coastal cities that view their ports as a source of economic growth and jobs.
The latest legislative development to irk California’s drayage industry is a bill designating port and intermodal rail drayage truckers as employee drivers. The bill, approved by a State Assembly committee, would allow unions such as the Teamsters to organize the drivers. Most drivers at U.S. ports are considered independent contractors, ineligible for union representation.
The bill is similar to an effort last year by Los Angeles, Oakland, Seattle and New York-New Jersey supporting congressional action to allow ports to regulate drayage at their harbors.
The California bill isn’t popular in Long Beach. “It is not consistent with building a robust economy,” Mayor Bob Foster told the seminar. Los Angeles and Long Beach, the nation’s two largest container ports, have clean-trucks programs. Los Angeles’s plan requires employee-drivers, while Long Beach allows the motor carrier to decide whether it wants to use independent contractors or employee drivers.
The state’s ports continue to grow despite the state’s negative reputation among some in the business community.
But continued growth in container volume could result in a loss of market share if other ports grow faster by diverting cargo from California’s ports, said Jon Haveman, founder and owner of Compass Economics.
His analysis of imports of toys, games and sporting goods indicates Los Angeles and Long Beach lost about 5 percent of those consumer goods through diversion since 2003, with the “reliability factor” playing a role in the diversion.
Contact Bill Mongelluzzo at email@example.com.