East Coast shutdown won’t hurt as much as West Coast strike
Setting up huge distribution centres along the Eastern Seaboard means shippers are there to stay, and the Panama Canal expansion will entrench this strategy.
When the US West Coast ports were shut down by a strike in 2002, throughput at the port of Savannah shot up by 22 percent. It was a year after China was admitted to the World Trade Organisation and the transpacific trade was booming.
As ships backed up outside the San Pedro port complex of LA-Long Beach, shippers scrambled to re-route their cargo via the Panama Canal.
For a while it was chaotic, and when the dust finally settled, ports on the Eastern Seaboard retained a good chunk of the cargo that had shifted from the west.
What is important to note is that most of the cargo that moved was destined for the Eastern states anyway and just routed through West Coast ports. The port closures made shippers look at an alternative way to get their goods to the same market.
Port congestion on the West Coast two years after the strike convinced shippers of Mid West or Eastern Seaboard-bound cargo to go for an all-water service via Panama.
The ports of LA and Long Beach have been vigorously lobbying for Asian cargo, offering long-term incentives in an attempt to convince the big shippers that their distribution centres belong in SoCal.
There is a long-standing relationship between LA-Long Beach and Asia, China in particular. The proximity of San Pedro Bay ports’ to Asia and a massive local market provide long-term network advantages that are compelling for importers.
So the boys in sunny California must be chortling into their black bean and organic lentil lattes, or whatever they drink over there, as they sit back and wait for the International Longshoreman’s Association to shut down the East Coast.
Talks between the ILA and the ports, represented by the United States Maritime Alliance (USMX), broke down last week and everyone is predicting a shutdown when the union workers’ contracts expire on September 30.
Most port employees are non-ILA, but union workers handle the stevedoring, so any industrial action will bring work to a standstill.
After growing steadily as stable gateways to the most heavily populated areas of the US, a shutdown not something the East Coast and Gulf ports need. They handled almost half the total number of containers passing through US ports last year.
On the positive side, 70 percent of the US population lives east of Dallas and Chicago and the biggest shippers all have huge distribution centres on the Eastern Seaboard. While a port closure will severely disrupt their supply chains, it won’t last long and it is unlikely shippers will suffer any long-term effects.
Also, the Panama Canal expansion will be completed by 2014 (according to the schedule) and all-water strategies are already deeply established.
* One of the big issues ports want tackled are the number of “no shows” and "low shows" among unionized employees. That is where dockers superfluous to the days’ needs sign in but are not required to work or are only needed for a short time and not a whole shift. A port executive told us that at one large East Coast port the number of no shows is 40 percent of the union workforce, which seems to be an incredible stat.
If anyone has information on how the no shows work and to what extent the practice is used, feel free to comment below.