Experts predict smooth West Coast shipping year, troubles ahead
The 2007 West Coast shipping year may go down in the history books as a smooth sailing year, but industry experts are tempering the news with predictions of troubled waters ahead.
Supply chain experts from the shipping, trucking, marine terminal, rail, retail and financial sectors all agreed that 2007 is shaping up as an uneventful albeit slow growth year, free of congestion and labor strife, with only minor possible hiccups to contend with through the end of the year. The comments came at Tuesday's 2007 Annual Peak Season Forecast Conference in Long Beach.
“We are still expecting the ports to handle a record amount of trade,” economist Paul Bingham of Global Insights told the audience. “It's just that the growth will be a little less than last year.”
Despite the growth, Bingham expects no congestion at major U.S. ports this year. He added that any glitches were “not expected to snowball into larger systematic problems for the shippers and the carriers.”
Ed DeNike, president of SSA Marine’s container division said that the Pacific Maritime Association, which negotiates for the industry with the International Longshore and Warehouse Union, has managed to provide enough work to keep longshore casuals in the labor pool, effectively eliminating one of the causes of the crippling labor shortages of 2004. Speaking to obvious concerns about upcoming labor negotiations, DeNike, a PMA board member, added that he had never seen a “better working environment with the ILWU than currently exists.”
On the retail side, Alison O’Donnell, government affairs director of the National Retail Federation, said that despite retail growth in 2007 getting off to a slower than last year start, there would be an end-of-the-year up tick in retail sales.
Patrick Kinne, general director of international marketing for BNSF, said his firm has made tremendous progress on upgrades throughout the rail line’s system. When coupled with BNSF’s recent investments in hundreds of new locomotives and thousands of new double-stacked train cars, the track improvements would significantly increase capacity and efficiency.
Despite the panelists painting a somewhat rosy picture for this year, each warned of challenges and potential trouble down the road.
While predicting a “relatively smooth operation” in 2007, Bill Rooney, Hanjin Shipping’s managing director, added that future predictions would get “progressively more exciting.”
Eliciting a gasp from the audience, Rooney predicted that, based on current throughput rates, the ports of Long Beach and Los Angeles will soon run out of terminal space. “And it will not be in 10 years,” he said, referring to a common 2015 date for such predictions. “We see it being in three to five years.”
Rooney also said that a “next year issue” is the industry pushing labor for a necessary doubling of current West Coast port throughput from about 5,000 TEUs per acre per year to about 10,000 TEUs per acre per year. “Unless we get from 5,000 to 10,000 we are going to be facing some serious problems in a few years.”
The 4.4 days of average dwell time at the ports, Rooney said, also remains an issue and needs to be addressed, not by the terminals or shippers, but by their customers. He said that a one-day reduction in dwell time would translate into a 25 percent increase in terminal efficiency.
The retail sector also has worries, said the NRF’s O'Donnell, as consumers for the most part have tapped out their housing equity. Coupled with the ongoing slowdown in the housing market and the evolving mortgage lender problems, she said this has resulted in less disposable income for retail products. This has shown up in a 7 percent decline in 2006 retail sales of building materials and furniture, which O’Donnell said might evolve into a drag on other retail sectors. She also pointed to future problems in volume surges overwhelming port capacity unless shippers begin to spread out sailings.
Global Insights’ Bingham said there are still serious concerns within the supply chain system that could pose problems. “Some elements of those concerns are tightness in the rail system in certain portions of the system that are near capacity.” He also pointed to potential problems from fuel prices and the introduction of the Transportation Worker Identification Card during the second half of the year. “We are not sure how the introduction of the card is going to play out. It is a wildcard that could affect operations.”
Representing the trucking sector, Brian Griley, president of Southern Counties Express Inc., said that 2008 could be a year of serious upheavals in his sector. A truck replacement program sponsored by the Long Beach and Los Angeles ports is set to kick off next year, but operational details of the program are lacking, Griley said. The program aims to buyback 14,000 old trucks and replace them with new cleaner-burning vehicles in an effort to cut emissions. It is unclear, he said, on how seriously this will affect port operations.
Griley also pointed to the TWIC card as a potential problem. With implementation set for next year, he said the TWIC card implementation poses some serious threats to the trucking industry. With a largely immigrant Hispanic workforce, he said that some percentage are likely to be denied the card for immigration issues. Even if that number is only 10 percent, he said, it would seriously deplete the truck driver workforce available for short haul work at the Long Beach and Los Angeles ports.