Ports on the West Coast have lost significant chunks of their usual business following unprecedented backlog and work slowdowns through the past year. However, now that the labor dispute that helped ignite an extended stretch of slow and difficult operations at ports such as Long Beach and Los Angeles has concluded, some are confident that business will eventually return.
Jon Slangerup, chief executive of the Long Beach port, told the Los Angeles Transportation Club that his complex, as well as the Los Angeles one, would regain most of the market share lost to ports on the East and Gulf coasts following the delays and work stoppages that characterized much of the past year, according to the Journal of Commerce (JOC). He cited lower inventory costs in Southern California as one reason he expected many shippers who have since diverted their goods to return to the West Coast. Importers are paying $2 million to $3 million more per day on the East and Gulf Coasts than they would be utilizing the Los Angeles-Long Beach port complex. In addition to lower costs, some shippers would also benefit from quicker turnaround should they shift back to the West Coast.
Long Beach works to win back shippers who headed East
The Los Angeles-Long Beach port complex has a value proposition that includes faster shipping to Asia and quick delivery to the interior of the U.S. via intermodal rail, Slangerup explained. The combination of high speed and low costs, he hopes, will drive business right back to the West Coast following a rough patch many believe is at least partially attributable to lengthy, tenuous negotiations between the Pacific Managers Association (PMA) and the International Longshore and Warehouse Union (ILWU).
During those negotiations, Los Angeles-Long Beach lost between 3 percent and 5 percent of its business, the JOC noted. Through the first half of 2015, the port complex saw its share of imports drop 5 percentage points to 50 percent, as locations near the Gulf of Mexico and along the East Coast benefited from importers diverting their business away from Southern California.
However, the biggest issue that many shippers had with West Coast ports – uncertainty of delivery – had been around before the contentious PMA-ILWU neogtiations, and still must be fixed before Los Angeles-Long Beach sees any substantial increases in market share.
Slangerup explained plans to make sure delivery is more certain in the future. For example, steps are being taken to turn Long Beach into a "smart" port, where stakeholders are able to access and share all sorts of information in real time. In addition, rail connectors, rail car storage and on-dock intermodal transfer capacity will all be improved through a $1 billion investment, according to the JOC.
Construction at West Coast ports will bring jobs in addition to business
Construction at Los Angeles-Long Beach will help create jobs for people in the area, in addition to benefiting shippers who currently use the port complex, or those who are thinking about bringing their business back to the West Coast. Long Beach harbor commissioners recently concluded talks with the Los Angeles/Orange County Building and Construction Trades Council (Los Angeles/Orange Counties BCTC) that will lead to a project labor agreement between the group and the Long Beach port, according to the Long Beach Press-Telegram.
Port officials have already negotiated labor agreements for two projects, the Middle Harbor Terminal modernizations and the Gerald Desmond Bridge replacement. With the latest deal with the Los Angeles/Orange Counties BCTC, other phases of port upgrades can begin with a guarantee of peaceful labor – likely important following the PMA-ILWU discussions. Doug Drummond, harbor commission president, noted the importance of guaranteed labor peace.
"It's worth it," he explained to the Long Beach Press-Telegram. "You buy fire insurance. You buy earthquake insurance."
Southern California ports are certainly taking steps toward bringing back the business they lost to Gulf and East Coast complexes. Whether those efforts will turn out to be successful, though, remains to be seen.