Retailers and other cargo interests are frantically seeking space on vessel sailings to West Coast and Canadian ports now that a strike by the International Longshoremen’s Association is becoming increasing possible when the dockworker contract expires on Sept. 30.
The questions facing those importers that normally ship through East and Gulf Coast ports is, will they be able to find space on vessels bound for West Coast ports this late in the game, and if so, how much will they have to pay to ensure space and equipment?
ILA President Harold Daggett on Aug. 22 said a strike next month was “likely” after contract negotiations with the United States Maritime Alliance employers’ group broke down.
The ILA turned up the heat a bit on Wednesday when Daggett’s former local voted to authorize a strike come Sept. 30 “if necessary.”
Such statements are extremely worrisome for importers because September and October are the busiest months of the year in the eastbound Pacific.
Savvy shippers who lived through the employer lockout of the International Longshore and Warehouse Union during West Coast dockworker negotiations in 2002, when the ports were shut down for 10 days, know that waiting for a strike to actually happen is a bad business strategy.
Dave Akers, managing director of the Toy Shippers Association, said that for months now he has been encouraging his members with time-sensitive shipments to be aware of the dangers of a strike and to take steps to reroute critical shipments. “We’ve told them, this is a very real situation,” Akers said.
Toy shippers and other importers have apparently been adhering to such advice. According to the Transpacific Stabilization Agreement, which represents the largest carriers in the eastbound trade from Asia to the U.S., its members’ vessel capacity utilization for the week of Aug. 12 was 96.65 percent to Los Angeles, Long Beach and Oakland, and 93.19 percent to the Pacific Northwest ports.
Pat Moffett, vice president of Voxx International, said some of that company’s electronic shipments that would have normally moved through the East Coast are now being shipped through Seattle-Tacoma. Moffett said he has found there is usually sufficient inland transportation capacity in Seattle to move containers to the final U.S. destinations.
Cargo that is booked next week on all-water services to the East Coast could get caught up in an ILA strike if it occurs on Sept. 30. It generally takes shipments 24 to 26 days from the last loading port in Asia to reach East Coast ports, and a day or two to unload the vessels.
Securing space on vessels destined for the West Coast will definitely be an issue, especially for those shippers that do not have a relationship with vessel operators in services to West Coast ports. With vessel utilization factors already at 93 to 96 percent of capacity, an increase of only 5 percent can push the vessels beyond capacity.
In fact, some shipments are already missing their intended voyages, known in the industry as rolling the cargo. “Some shipments have already been rolled,” Akers said.
Price also becomes a factor. Importers that have reached the minimum volume commitments in their contracts may find their carriers will charge them the going rate for cargo consolidators. Carriers say slots sold to consolidators, also known as non-vessel-operating common carriers, are still available on some voyages.
However, the Aug. 13 spot rate for NVO shipments from Hong Kong to Los Angeles was $2,730 per 40-foot container, according to the Drewry Container Rate Benchmark. That can be as much as $1,000 higher than the contract rate negotiated by larger shippers earlier this year.
Some shippers say their commitments to customers leave them little choice to absorb higher costs for transshipment.
A logistics executive at one large chemical producer said he’s diverting shipments from East and Gulf coast ports to eastern Canada, the West Coast and Mexico. He said the changes in ports would more than double transportation costs, in addition to raising inventory-carrying costs.