By Gavin van Marle
The effect of the port congestion on the U.S. west coast in the first quarter has virtually cancelled any container growth in the country this year, according to the Journal of Commerce’s chief economist, Mario Moreno.
Speaking at last week’s TPM conference in Long Beach, Mr. Moreno told delegates the congestion had prompted him to downgrade growth predictions of both containerized imports and exports through the country’s ports by over 5 per cent. “I have downgraded container import growth forecast from 6.8 per cent to 1.7 per cent for the full year 2015. This is the worst port disruption in many years, including 2002 – this time it’s different. January imports were down 10 per cent year-on-year and February will be disappointing.”
Mr. Moreno predicted that the country would import 19.3m TEUs this year, up marginally from last year’s 19m TEUs, significant cargo being rerouted though the U.S. east and Gulf coasts and Canada and Mexico. The standstill in container volumes comes at the same time as U.S. GDP growth is expected to accelerate from 2.4 per cent last year to 3 per cent in 2015, propelled by growing consumer spending and a recovery in homebuilding.
Meanwhile, this year could be disastrous for U.S. exporters, and Mr. Moreno revealed that his previous forecast of a modest 0.1 per cent contraction in exports, brought about by a strengthening dollar, would widen to a 4.4 per cent contraction, thanks to the congestion.
This will be the second successive year that U.S. exports have declined. Last year’s 11.9m TEU represented a fall of 2.4 per cent on 2013, and this year they are forecast to decline again, with food exporters at the sharp end. “A lot of fruit and other foodstuffs have been left to rot on west coast quaysides and this lack of dependability will hit U.S. exporters as global buyers search for other sources,” he said.
National Retail Federation (NRF) Chief Executive Matthew Shay said that the long-term damage to the credibility of the U.S. west coast container supply chain was one of his members’ greatest worries. “We can’t go through this again and there won’t be a bright future if each new agreement takes 10 months to negotiate.” He added: “Twenty-first century business needs twenty-first century infrastructure – modern ports and faster trains – and U.S. ports are not as modern as they should be, and are acting as an impediment to an efficient supply chain.”
Mr. Shay said that NRF research has shown that some 65 per cent of its shippers will move less cargo through the U.S. west coast this year and the next. A third of those lost volumes will go to the U.S. east and Gulf coasts, and he lamented that permanence of the trade that had already been lost to the retail industry – which employs one in four workers in the country, making it the single largest industry by employer. “We have heard countless anecdotes – the stories have been very painful and this is economic activity that doesn’t come back. If you miss that sale or season, you don’t get that opportunity again.”
However, he also noted that the congestion had even hit supplies to the U.S. military and the country’s medical services. “We are all still worried, and we should be, because this even forced military personnel to go without supplies. “And given that 95 per cent of medical clothing in the U.S. is manufactured outside it, thank God we didn’t have a medical emergency,” he said in what may have been a thinly veiled reference to the ebola crisis that unfolded at the same time as the congestion.
In a speech that was punctuated by rounds of spontaneous applause, Mr. Shay also called for a root and branch reform of the relationship between management and labour in the U.S.’s container supply chain. “The ongoing uncertainty over labour negotiations cannot be tolerated as standard operating procedure; it cannot be tolerated that a small group of people narrowly following their own agenda can put the livelihoods of so many others at risk – this has been a near-death experience for some and we should never forget that many business will not reopen after this.
“There is something else at risk, and that is the image of the U.S. as a reliable trading partner. Labour laws and regulations have to be reformed to make sure this doesn’t happen again. We obviously respect the collective bargaining process, but there must be a way that a few thousand workers can negotiate without putting the jobs of millions at risk. “And once we have modernized the labour agreement we can get on with modernizing our infrastructure and trade agreements – we shouldn’t waste this great opportunity to modernize, the question is whether we will rise to the challenge,” he told delegates.
Reprinted courtesy of The Loadstar (www.loadstar.co.uk)