From labor battles to natural disasters, 2012 was filled with risk for shippers and the companies moving and managing their cargo. Here are the stories that defined the year.
THE ILA VS. USMX
As 2012 entered its final days, the International Longshoremen's Association was on the verge of its first coastwide strike in 35 years. In a speech to the JOC's Trans-Pacific Maritime conference in early March, ILA President Harold Daggett rattled the industry by warning a strike was possible. Negotiations opened in late March and continued in fits and starts through the year.
The ILA and United States Management Alliance agreed in July on two of the ILA’s top demands — automation and jurisdiction over chassis repairs — but negotiations collapsed the following month when USMX complained that the ILA was unwilling to bargain. Shippers rushed to build stockpiles or divert cargo. A federal mediator got the talks going again, and the contract was extended past its Sept. 30 deadline. Negotiations bogged down again in December. ILA delegates authorized Daggett to call a strike if there was no agreement by the new Dec. 29 contract expiration. Talks broke down on Dec. 18 when the two sides were unable to agree on a second extension. The sticking point was the ILA’s insistence on tying a contact extension to continuation of the status quo on container royalties. Daggett said a strike was likely, and both sides began preparing for one.
THE LA-LONG BEACH SHUTDOWN
After 2 ½ years of inconclusive negotiations, the Office Clerical Unit of International Longshore and Warehouse Union on Nov. 27 began picketing at 10 of the 14 container terminals at the nation’s largest port complex.
Cargo handling ceased as ILWU dockworkers refused to cross the picket lines. The clerical workers said they were attempting to prevent outsourcing of OCU jobs. Employers were attempting to end what they said are outdated work rules and so-called featherbedding. A tentative agreement was reached Dec. 4 as federal mediators were in transit from Washington to help out in the negotiations.
The shutdown represented the biggest labor dispute among many up and down the West Coast. In ongoing disputes ILWU grain handlers are taking on ports in Washington and Oregon, and the union is contesting two reefer-equipment-handling jobs with terminal operator ICTSI that members of the International Brotherhood of Electrical Workers have handled for more than 30 years.
When monster Hurricane Sandy’s storm surge struck New York and New Jersey on Oct. 29, it not only destroyed hundreds of homes and closed the region’s rail and road network for days, but also rolled over the port’s terminals, scattering containers and damaging cranes.
In what was described as a miracle, the terminals reopened less than a week later, but all inbound containers were diverted to Baltimore and Norfolk, creating a migraine for importers who had to pay through the nose to get them back north.
THE INFRASTRUCTURE PRESIDENT
President Obama’s re-election and the continuation of Republican and Democrat control of the House and Senate set the stage for a much-needed federal infrastructure investment push. But although partisan bickering has subsided, Obama and Congress first must offset the so-called fiscal cliff to prevent the U.S. from slipping into another major economic slowdown.
SHIPPING’S RATE VOLATILITY
Global shipping lines took a roller-coaster ride in 2012. Rates plummeted at the beginning of the year, extending their losses from 2011, but recovered enough to bring them out of the red. By year-end, rates were sliding again, and analysts said carriers would be hard-pressed to sustain increases in 2013 because of the record amount of vessel capacity due for delivery. That could signal even more frequent ups and downs in the coming year. Will carriers have the discipline to idle enough capacity to keep their bottom lines in the black? Stay tuned.
THE TRUCK DRIVER SHORTAGE
The much-expected and ballyhooed truck driver shortage didn’t really materialize in 2012, for the same reason the predicted trucking and intermodal capacity crunch failed to show up in 2011: an anemic U.S. economic recovery. The driver shortfall forecast — more than 200,000 or 300,000 drivers, experts feared at one point — was reduced to a 25,000 to 30,000 shortage out of 750,000 available truckload units, the American Trucking Associations said in November. Economist Noel Perry put the shortfall at 100,000 drivers and said there’s work available for about 2.6 million drivers, a “normal” shortage in a slow economic recovery.
But the endemic problem of finding and hiring drivers isn’t going away, and could become tougher in 2013, thanks to new federal regulations. Truckload carriers are making progress toward recognizing the root problems that make it difficult to hire and keep drivers: low and uncompetitive pay; long hours and days and weeks away from home; and general disrespect for the worker most critical to supply chain success. There’s hope carriers and shippers can find common ground to solve this perpetual problem, which even in 1914 was about pay and respect.
THE PANAMA CANAL
The Panama Canal Authority discovered it couldn’t meet the original timetable for the opening of its supersized new locks in October 2014, because the contractor constructing the new locks couldn’t make concrete that would last another 100 years.
Incoming Administrator Jorge Quijano, who took over canal leadership in October, pushed the opening date back to mid-2015. After 17 years at the canal’s helm, outgoing Administrator Alberto Aleman Zubieta said it will need to expand again to handle container ships with capacities of more than 13,000 20-foot-equivalent units that were built after plans for the first expansion were completed.
YRC WORLDWIDE SURVIVES – AND THEN SOME
In early 2012, “Can James Welch Save YRC Worldwide?” wasn’t an abstract question. Once the largest U.S. less-than-truckload operator, YRC Worldwide lost more than $2.9 billion and shed more than $5.6 billion in revenue between 2006 and 2012. No trucking company so large has lost so much and survived. Its collapse would have reshaped the LTL market — spurring rate increases for shippers. Under Welch’s stewardship, however, the ailing less-than-truckload giant sharply reduced its losses until it reported a real net profit — one based on trucking operations, not debt-for-equity swaps — in the third quarter of 2012. That $3 million net profit included a $2.8 million operating profit at YRC Freight, its struggling long-haul LTL subsidiary. YRC Worldwide’s three regional LTL carriers — New Penn, Holland and Reddaway — already were and are increasingly profitable. Welch called the third quarter results “encouraging,” but recognized the $4.9 billion trucking giant still has a long way to go to secure its recovery and a brighter future.
MEXICO MAKES ITS MOVE
In a strong indication of near-sourcing trends at home and abroad, Mexico’s manufacturing sector boomed, exports to the U.S. soared and its middle class bloomed, sending ripples through the country’s supply chain. Despite taking market share from China by offering cheaper transportation and competitive labor prices, however, Mexico still must grapple with bloody gang violence, bureaucratic red tape and monopolies in energy and telecommunications.
CHINA’S EVOLVING TRANSPORTATION POLICY
Whether the new Beijing leadership improves the country’s supply chain through opening its logistics market to foreigners will determine China’s economic future. China needs to improve its freight connections to better connect its factories, which are increasingly moving westward toward lower labor costs, to ports if the country wants to remain the world’s factory.
THE CHASSIS CONUNDRUM
Container lines further disengaged from the business of routinely providing free intermodal chassis to customers. Carriers announced a series of plans to exit chassis pools in selected ports and cities. International Longshoremen’s Association President Harold Daggett, who had criticized the shift of chassis from ILA-contracted carriers, negotiated guarantees that the union would retain its jurisdiction over chassis maintenance and repair. Other developments during the year included the sale of Direct ChassisLink Inc., the Maersk unit that pioneered daily chassis leases to truckers, to a private equity firm. Three years after DCLI’s formation, it was becoming clear to industry leaders that a variety of chassis supply models would emerge. One was the creation of a trucker-owned chassis pool that is expected to grow as an industry force.
UPS’S EXPLOSIVE DEAL
The largest U.S. transportation and logistics company made a bold bid to become an even larger international force by offering $6.8 billion for Dutch express company TNT, an acquisition that, if approved by European regulators, would greatly strengthen UPS’s presence in international express markets from Europe to Asia. That $6.6 billion bid was the biggest in an active transportation acquisition market in 2012. Despite a weak U.S. and global economy, M&A activity kept a steady pace in transportation and logistics, as private equity and companies with ready cash and cheap financing found willing sellers. In the U.S., transportation holding company Arkansas Best spent $180 million to purchase Panther Expedited. But 2012 witnessed many small, “tuck-in” acquisitions by companies such as Roadrunner Transportation Systems and Celadon Group as larger trucking operators shopped for new customers, capacity and truck drivers.
THE PORT OF THE FUTURE
With container ships of up to 13,000 TEUs already calling in Southern California, it will no longer be business as usual for terminal operators and longshoremen. Orient Overseas Container Line’s terminal operating subsidiary, Long Beach Container Terminal, announced in the spring that work would begin on the most highly automated container terminal in North America. The terminal will feature automated guided vehicles, dual-hoist cranes and automated stacking cranes. International Longshore and Warehouse Union leaders went to OOCL’s headquarters in Hong Kong to register their support for the automated terminal.
FACEOFF AT CP
Activist investor William Ackman’s victory in a proxy fight for control of Canadian Pacific Railway triggered a major restructuring of North America’s most underperforming major railroad. Under the helm of railroading legend Hunter E. Harrison, CP is on track to become a leaner and fiercer competitor to larger archrival Canadian National Railway.
NATURAL GAS POWER
The comparitively cheap and abundant supply of natural gas being unlocked in the U.S. is finally making alternative fuels more than a tree-hugger’s fancy. In 2012, liquefied and compressed natural gas changed from being something trucking companies thought “would be nice to have” to something they “really must consider.” Energy companies including Clean Energy and Shell began building out LNG fueling stations at truckstops for heavy trucks and rolling out more CNG fueling stations for regional or urban vehicles, including delivery trucks. Natural gas engine technology is catching up with demand, and will improve in 2013. The driving factors are the big cost difference between natural gas fuels and diesel, and the fact that natural gas prices are less volatile. Natural gas is drilled in the U.S., and is abundant. What’s not abundant, however, are places to fill up with LNG or CNG, and the lack of an adequate fueling infrastructure is the main obstacle, in the short term at least, to expanding natural gas-powered trucking. Expect fuel providers to slowly chip away at that obstacle in 2013 and in coming years.
LA, LONG BEACH CLEAR THE AIR
The historic Clean Air Action Plan adopted by the ports of Los Angeles and Long Beach in 2006 is producing amazing reductions in harmful diesel emissions from trucks, vessels, harbor craft, cargo-handling equipment and trains. Total pollution at the port complex has fallen by more than 50 percent since 2005. Thanks to the trucking component of the CAAP, truck emissions have declined by more than 80 percent. The ports have since updated the CAAP to set even higher goals for the next five years.