Port Congestion Update: A Moment of Relative Calm Before the Storm

February 24, 2015

As everyone is now aware, the ILWU and PMA have agreed on a contract. I have had a number of people come to me in the last two days asking if everything is back to normal. To be frank, I’m not sure if we will ever get back to “normal.” I think it is most important right now to talk about what we can expect in the coming weeks and months.

My prediction is that we will see a very short week of calm (especially in the port of Oakland) before the storm really hits. There is an enormous backlog of vessels waiting to be unloaded, most notably in Los Angeles. Now that the ILWU is back and working in full force and at productivity levels back to what was expected of them before the contract disagreement, how quickly can these terminals and the shipping community process the backlog. There is no question that there are more containers on vessels waiting in Los Angeles/Long Beach than the port can really handle at one time. The same goes for the other West Coast ports.

As the ILWU mentioned a number of times during the contract disagreement, the congestion crisis was also a result of infrastructural issues that the steamship lines must work with terminals to resolve. The flood of containers waiting to be brought into the terminals is only going to exacerbate the infrastructural issues. We saw a number of terminals close various container storage areas for days, if not weeks, during the crisis. We should expect this issue to continue to be a problem. We saw containers unable to be picked up due to chassis shortages. This may also continue to be a problem.

Importers should not expect a quick return to immediate container availability once a container gets off a vessel. While they may see this temporarily, my feeling is that it is only a calm before the full force of the vessel and container backup hits the terminals in coming weeks.

While vessel transit times should be slowly speeding up, they will not immediately return to pre-congestion time tables. We will likely have to wait months for the transit times to very gradually get back to a predictable number of days. The same goes for vessel sailing schedules. The shipping community has become accustomed to weekly sailings on designated days by various steamship lines. We should be ready carrier schedules to be off kilter for a good amount of time.

-Jimmy Ting
Great World
jimmyting@gwlcorp.com
t: 650-873-9050 x1019

Oakland Port Update – Terminals Open for Container Pickup, But No Shipside Labor for Container Unloading

February 23, 2015

We were hopeful that the ILWU and PMA agreement would lead to both sides working hard to get operations moving back to normal. However this apparently was not the case in Oakland. The terminals did request labor on Sunday to start unloading containers. However the ILWU labor was fired from the job for taking a break at the same time. This is not allowed by rule.

Labor was hired on Sunday evening to continue working shipside to unload containers. However I spoke with a carrier representative today, Monday morning, and it looks like the first shift working shipside at Oakland was fired AGAIN. While Oakland terminals are currently open for truckers to go into and pick up containers, no one is working to unload containers off of vessels during the day.

So far, this problem has only manifested in Oakland as we have not heard the other major West Coast ports (Los Angeles/Long Beach/Seattle/Tacoma) run into this issue the last two days.

-Jimmy Ting
Great World
jimmyting@gwlcorp.com
t: 650-873-9050 x1019

PMA and ILWU Announce a Tentative Contract Agreement!!!

February 20, 2015

The ILWU and PMA have finally come to a tentative contract agreement. The ILWU has been working without a contract since July 2014. In that time, we have seen the West Coast ports come to a virtual standstill.

Details about the contract are still unknown. Both the PMA and ILWU have to ratify the contract. It does look like having the Secretary of Labor, Tom Perez, join in the contract negotiation process earlier this week has helped push the two sides come to a contract agreement.

Assuming the contract is ratified by both sides, it still is going to take months for the congestion to unwind. Importers and exporters should not expect ports to suddenly start operating efficiently. There is still a backlog of containers that need to be picked up from the ports as well as export and empty containers that need to be returned to the port. Furthermore, vessels are all over the place. Carriers will need months to get their schedules back on track. Most importantly, the basic infrastructural issues that have contributed to port congestion remain unresolved.

I will look on the bright side and say that we hopefully have the worst behind us (at least until this five year contract expires). I am happy to finally have some good news to announce after months of negative news.

Have a great weekend everyone.

-Jimmy Ting
Great World
jimmyting@gwlcorp.com
t: 650-873-9050 x1019

West Coast Port Update: How Many Work Days Are In A Standard Work Week?

February 18, 2015

How Many Work Days Are In A Standard Work Week?

This is a trick question obviously. In Oakland, the latest tit-for-tat we are seeing this week is the ILWU deciding to hold their monthly work stoppage meeting during regular weekday working hours this Thursday rather than during night hours (standard practice). This is obviously retaliation for the PMA not employing ILWU labor over the President’s Day weekend to unload containers.

Cory Peters of Gardner Trucking explains the current situation very well in his recent newsletter to us:
ALL TERMINALS CLOSED IN OAKLAND 2/19:
The ILWU in Oakland has just announced they will be holding their monthly Stop Work meeting this Thursday during the day-shift (0700-1630).  This means all terminals at the Port of Oakland will be closed Thursday.  The IWLU holds Stop Work meetings on the third Thursday of each month in Oakland and on the first Thursday of each month in LA/Long Beach.  These meetings typically take place on the second shift (1800-0200).  It appears this week’s Stop Work meeting is in direct retaliation for the PMA not allowing them to work yesterday’s holiday and this past weekend.  Since Oakland has no night gates, this will be the 3rd full closure of the port in the past 5 working days.

PMA/ILWU CONTRACT NEGOTIATION UPDATE:
There is no update.  Both sides continue to play games while directly affecting the livelihoods of your business and ours.  Rumors continue to circulate as to what the problems are, but to date actual productivity at the port terminals remains horrendous.  As most of you know, it is nearly impossible to ship exports at this time, and those on the import side continue to see delays of numerous weeks, some over a month.  I’ve said it before, and I’ll say it again… even when a contract is agreed upon between the PMA and ILWU, there will still be serious fundamental problems with the industry which will not have been addressed.  The situation at the port terminals will be better than today, but far from where they should be.

EMPTY RETURN RESTRICTIONS:
We have seen a massive increase in the number of Steamship Lines not allowing empty containers to be returned.  For those not aware, this means import containers have nowhere to go back to once they are unloaded.  Not only does this hurt the supply of available empties for exports, the Steamship Lines are still charging container per diem for not returning the empties (even though they will not provide a return location for said empties).  This is happening much more in Oakland than LA/Long Beach.  As of today, the following Steamship Lines are not receiving empty containers, or are putting restrictions on the returns which make them nearly impossible to return (i.e. dual transactions only):

Steamship Line Port
China Shipping Oakland
Cosco Oakland
Hanjin Oakland
Hapag Lloyd LALB
Mitsui OSK Lines Oakland
NYK LALB
OOCL LALB
Yang Ming Oakland

Effective immediately, we will be adding stop-off and storage charges on all empties which cannot be returned.  These will be added to our import drayage invoices.  We apologize for having to do this, but unfortunately we cannot continue to store the Steamship Line equipment for free.  Ideally, we could charge the Steamship Lines for this, but because of the way the Interchange Agreements are written, there is currently no recourse for this.  Stop-off charges will be $100/container, storage charges will be $25/night.  Per Diem charges levied by the Steamship Lines will be passed through as we currently do.

CHASSIS SHORTAGE:
You’ve probably read about chassis shortages in the recent press releases regarding the port situation.  The empty restrictions listed above, as well as the vessel delays not allowing export loads to be returned are tying up thousands of chassis along the West Coast.  Sure, there are other issues with the current chassis model, but the majority of the chassis shortages today are a direct result of the terminals not accepting containers.  If you keep thousands of containers and chassis out of the terminals, there are not enough chassis to pick up more containers at the terminals.
______________________________________________________________

I couldn’t have written it any better. We heard over the weekend that President Obama has finally sent the Secretary of Labor, Tom Perez, to intervene, but at this point, I don’t see what good the White House can do. They sent a Federal mediator at the beginning of the year. Six weeks later, the ports are even in worse shape.

The Wall Street Journal also wrote a piece this morning talking about the damage that this port crisis is having on the economy. I am sure that each and everyone importer and exporter is experiencing the pain firsthand.

I keep wishing for some positive news.

-Jimmy Ting
Great World
jimmyting@gwlcorp.com
t: 650-873-9050 x1019

West Coast Ports Still Open … Sort of… Maybe… Perhaps… Perhaps Not…

The word of the day is ambivalence. The title of the newsletter describes exactly how I feel about the West Coast port situation. Here is what we do know.

  • We haven’t heard of a terminal shutting down through the first three days of this week. Yay!
  • The PMA indicated that they will suspend vessel operations for four days during this holiday weekend. Boo!
    • Thursday, 2/12 (Lincoln’s birthday – holiday)
    • Saturday, 2/14 and Sunday, 2/15 (Weekend – similar to what happened last week)
    • Monday, 2/16 (Washington’s birthday – holiday)
  • The ILWU has claimed that the two sides are “this close” to an agreement. Yay!
  • The PMA mentioned on Wednesday that the ILWU’s latest contract demands are ridiculous. Boo!
  • Maersk has announced more vessel sailings to Oakland will be discontinued with containers stranded in Los Angeles. Importers will have to pay for moving the containers to Oakland from their own pocket. Boo!
  • We have not seen other carriers follow Maersk’s lead on this yet. Yay!

I get the feeling that we are close to a port shut down and at the same time so close to a contract agreement. If there was certainty of a port shutdown or of a contract agreement in the coming week, importers and exporters would be better positioned to make decisions regarding how to act. However this uncertainty leaves the shipping community feeling paralyzed.

Even if a contract is agreed upon in the coming week, it is going to take months to reduce the congestion. The one thing we should continue to expect in the coming months is congestion.

-Jimmy Ting
Great World
t: 650-873-9050 x1019
email: jimmyting@gwlcorp.com

West Coast Ports to Temporarily Suspend Weekend Vessel Operations

February 6, 2015

After the PMA’s announcement earlier this week that West Coast ports are on the verge of an involuntary port shutdown, we maybe seeing the process slowly playing itself out. The PMA announced today that terminals would not be hiring labor this weekend for vessel loading and unloading. Terminals had already a few weeks ago discontinued night operations for vessel loading and unloading. For the terminal operators, it didn’t make sense for them to be employing labor to remove containers into already congested terminals. This announcement will only further delay cargo arriving at West Coast ports. Note that labor will still be used for basic yard, rail and gate operations.

Another indication of how close we are to a complete terminal shutdown is the fact that numerous terminals are not allowing return of empty containers. In such circumstances, will the carrier charge for detention fees? Who will pay for the chassis rental fees for each day the container sits outside the terminal with a chassis? Won’t this only exacerbate the chassis shortage issue? How LONG will terminals delay the receiving of empty containers?
___________________

Carriers beginning to declare Force Majeure?
Maersk made a decision this week to drop all Oakland bound containers on the DS National v.503 in Los Angeles/Long Beach. While other carriers have made similar decisions a number of times over the past month, the difference this time is that Maersk is terminating the shipments in Los Angeles/Long Beach and will not be responsible for moving the containers up to Oakland. With previous instances this past month, carriers have decided to rail the Oakland containers from Los Angeles/Long Beach. However by terminating the containers in Los Angeles/Long Beach, Maersk is in effect declaring Force Majeure. Maersk has made a similar decision with Oakland bound containers on the Gudrun Maersk, which has not yet arrived in Long Beach.

Importers with containers on these two vessels will be forced to arrange their own transportation of the containers up to Oakland. What makes this current circumstance so troublesome is the following:

  • Maersk is requiring that the empty containers be returned to the terminal from which it was picked up.
  • However the terminal is incredibly congested and from what we have heard is unable to receive a return empty container.

Importers are therefore facing a no win situation. They can pick up a container, but face possible detention charges and chassis rental charges. Or they can leave a container inside a terminal and face demurrage charges. All of the above is assuming that a trucker can even be located who is able to pick up the container.

Assuming other carriers begin following Maersk’s decision above, we can only expect to see even more container congestion in Los Angeles/Long Beach.

-Jimmy Ting
Great World
jimmyting@gwlcorp.com
t: 650-873-9050 x1019

PMA Provides Clarity on a Possible Port Shutdown

PMA Provides Clarity on a Possible Port Shutdown

Wednesday, February 2, 2015

As mentioned yesterday, rumors are flying around that West Coast ports will begin shutting down gradually this week (either via lockout or strike). This afternoon, James McKenna, President and CEO of the Pacific Maritime Association, the organization negotiating on behalf of the steamship lines and terminal operators, sent out a public video message. The message spells out the following:

  1. The impact of slowdowns at the terminals the past three months has reach critical levels.
  2. The offer that the PMA has presented on the table for the ILWU is more than fair. This is the first time that details of the offer have been made public. Detailed information regarding negotiations have been heretofore subject to a news blackout.
  3. A line is being drawn in the sand. McKenna seemed to imply that there is impending gridlock and that if the ILWU doesn’t act to approve the latest offer on the table, there is nowhere left to go other than a work stoppage.

The ILWU has not yet responded to McKenna’s public statement. However what we are seeing here is a tension ratcheting up, not down.

I will continue to provide updates as we receive them.

-Jimmy Ting
Great World
t: 650-873-9050 x1019
jimmyting@great-world.com

Possible West Coast Port Shutdown

It appears just as we were seeing signs of hope last week, the West Coast ports may be heading full steam towards the shutdown that we have all been fearing. CBFANC (Customs Brokers & Forwarders Association) has issued the following update from Pacific Coast Council’s Peter Friedman:

“I have refrained from spreading all the rumors, but this one has firm basis and warrants preparation:  it appears that there will be a gradual lockout this week, expanding over the weekend, and fully implemented next week. It is possible the ILWU will take some action to be the “first” to act, but the result will be the same – shut-down of the west coast.”

As of Tuesday afternoon, February 3rd, Great World has NOT yet seen any signs of a gradual lockout on the West Coast. In fact, we saw some small improvements at various terminals this past week. We are going to be vigilant and report any signs of a real lockout or shutdown.

Let’s keep our fingers crossed and hope that we are not staring at a shutdown.

-Jimmy Ting
GWL Corp.
tel: 650-873-9050 x1019
email: jimmyting@gwlcorp.com

State of US West Coast Shipping Heading into the Chinese New Year

As we close out the month of January, I think it is extremely important for those who ship into and out of the U.S. West Coast ports to have a clear outlook of what to expect in the following months. Chinese New Year is on the horizon (February 18th) and is already impacting the shipping industry.

West Coast Terminal Congestion
Los Angeles and Long Beach ports continue to be a bottle neck. Vessels anchor outside the port waiting to be worked on and when they are worked on, it is taking over a week for the work to complete. Vessels are overall averaging two weeks or longer in Los Angeles/Long Beach. Many steamship lines have taken to “drifting” their vessels as they sail towards Los Angeles/Long Beach, as there is no point in rushing the vessels to the port if the vessels are expected to anchor and wait to be worked on.

I have heard rumors of customers paying massive amounts of demurrage / storage charges in Los Angeles / Long Beach, with one customer telling me they had a bill from their freight company for over $40,000 in demurrage fees and another customer mentioning a bill of over $30,000. I’m not sure how accurate these stories are, but they are an example of what many importers are facing as they fight to get their containers at the port. Importers are not just fighting to get containers out, but also fighting the terminals/carriers over demurrage charges.

While Oakland continues to face similar congestion, the port at least was able to go one week without a terminal closure incident. Various truckers are still refusing to go into the problem terminals, in particular SSA Terminal. However we did notice that containers arriving at Evergreen’s BENT terminal this week were able to become available for pick up within a day or two after coming off the vessel. This was a great improvement over previous weeks when we would routinely see containers be placed in closed areas for roughly a week after coming off the vessel.

Are any vessels still planning to come to Oakland?
Due to the delays in LA/LB, carrier sailing schedules are no longer able to follow predictable weekly sailing patterns. In order to try to get vessels back on schedule, many carriers have eliminated calling second ports along the West Coast. For example, Oakland has seen a drastic reduction (at least five strings have been eliminated). I have heard other carriers also are discussing whether or not to remove Oakland as a port calling. One carrier representative explained to me that the cost of sending a container from Los Angeles/Long Beach to Oakland via rail was cheaper than sailing a vessel to Oakland and having it wait at the port to be worked on. It is no coincidence then that more carriers are also discussing dropping Oakland as a port calling.

Are there any vessels to pick up containers in Asia before the CNY?
One carrier representative advised me yesterday that space on vessels departing from Asia is completely booked up through the month of February. This is due to a combination of reasons:

  • The usual surge of product departing from China before the CNY.
  • The fact that most vessels are stuck on the West Coast waiting to go back to Asia.
  • Despite the lack of vessels and abundance of cargo, carriers are still planning on skipping a week and having a “blank” sailing after the CNY.

PMA-ILWU Contract Situation
I do view the fact that Oakland went a week without a labor stoppage as a sign that the contract negotiation is finally moving forward. Assuming the two sides don’t have any massive arguments in the coming week, there is room for optimism that a contract may finally be agreed upon.

Nevertheless, even when the PMA and ILWU agree on a contract, it is going to take months to unwind ourselves from this mess at the ports.

If you have space confirmed with a carrier, I highly recommend that you don’t mess around with it. I have had various importers and exporter come to me complaining about the listed transit times on containers that we have booked. In light of the vessel availability situation, the top priority for every importer should be just getting product out during the month of February.

Let me know if you have any questions.

-Jimmy Ting
Great World
jimmyting@gwlcorp.com
t: 650-873-9050 x1019

Are We On The Verge of a Complete West Coast Port Shutdown?

Update on Port Conditions

I don’t want to be the boy who cried wolf, and I certainly have been ringing the alarm often these last few months. However recent actions at the West Coast port terminals have undeniably put us right on the brink of a complete port shutdown. With all three major ports areas (Seattle/Tacoma, Oakland, Los Angeles/Long Beach) discontinuing longshoremen labor at night to unload containers off vessels, the port conditions will only continue to get worse.

In the past few weeks we have seen the following:

  • SSA and BENT terminal in Oakland shut down last Thursday due to disagreement between the ILWU and PMA..
  • Five strings calling the port of Oakland have been eliminated. This will significantly decrease the capacity coming to Oakland. Those with containers on vessels that eliminated the Oakland port calling will have containers railed to the port of Oakland from the port of discharge.
  • Vessels continue to sit at the port of Los Angeles/Long Beach for multiple weeks before departing.
  • Containers that are unloaded from vessels have an increased likelihood of being put into a closed area.
  • Steamship lines and terminals are in some cases barely extending any free time when containers are put into closed areas.
  • Some terminals are refusing to accept empty container returns for extended periods of time.
  • For export shipments, some terminals are refusing to accept loaded containers that are ready to be delivered to the terminal. This only acerbates the chassis shortage problem as many of these loaded containers are sitting on chassis that are much needed on the import side. One of our trucking partners indicated to us that they have over 300 loaded export containers sitting in their yard or at their customer’s dock waiting for the terminals to accept them.

I mentioned that the PMA and ILWU agreed to Federal Mediation at the beginning of the year. Mediation was supposed to be accompanied with a news blackout. However both the PMA and ILWU have been trading public attacks leading us to believe that mediation is not working.

My feeling is that the next step will be a complete port shutdown. There’s no where left for the situation to progress to. One local carrier representative mentioned to me that we should pull out from the ports as many containers as we can right now as a shutdown could happen any moment. I found this comment amusing as no one is holding back on pulling out containers. We’ve been desperately trying to get containers out as quickly as possible these last few months. The trucker who has 300 export containers waiting to be returned to the terminal also believes that this situation cannot go on for long.

Monday, January 19th, is MLK holiday. Some terminals are open. Others will be closed. A few will be open in limited capacity only. One less day to pull out containers will not help.

I hope I am wrong about a shutdown, but all signs indicate that we are sitting on the precipice and staring straight at a shutdown.

What alternatives do shippers have?

Many shippers have come to me asking me what alternatives they have.

  • If they have the ability to ship to the East Coast or perhaps to Houston, this is an alternative. Note that transit time is long (but perhaps not as long as having to wait it out at the West Coast ports). Furthermore, capacity on vessels to the East Coast is also very tight.
  • What about Canada? If you ship to the Midwest, you should undoubtedly be looking at rail through Vancouver or Prince Rupert as an alternative. However for those on the West Coast, is Vancouver really a viable option? The product would have to be removed from the container and transloaded onto a trailer before being trucked to the most locations in the United States. I recently priced this service out with a few various truckers. The current rough estimated cost to get a container of product from Vancouver to the San Francisco Bay Area would be somewhere between $4500 and $5000. There would be some variation depending on the size of the shipment and whether or not the product floor-loaded or palletized. This is a very rough estimate that could certainly change in the coming months/
  • What about air freight? This would have to be a last resort as air freight rates will assuredly surge during this time.

We will be watching this situation closely and providing updates as we receive them.

– Jimmy Ting
Great World
jimmyting@gwlcorp.com
t: 650-873-9050 x1019