Transportation changes spark new challenges at ports
January 21, 2015
In a world used to rapid change, the West Coast’s ocean transportation system is struggling to keep up with demand. From steamship lines and the ports that serve them, to the port workers and customers who depend on trade, all continue to work through challenges that came to a head in 2014.
Changes have been developing for several years. Union and port officials rightly point to record import levels and rail service delays as major challenges. However, there are key contributing factors that tied the ports in knots over the past summer.
After waiting for several years, the shipping lines have brought new super tankers on line. These ships carry several hundred to thousands of containers more than older ships. The ports, for their part, were aware of the new tankers and the increased volume they represented, but failed to modernize facilities. More berths and chassis-holding facilities, for example, are needed to properly handle the increased volume.
The shipping lines also decided to sell their chassis – flat steel-frame trailers used to haul containers in and out of the port – to third-party equipment-leasing companies. These actions ultimately lead to a shortage of tractor-trailer chassis. With the steamship lines no longer managing chassis, the equipment rental companies worked to sort out their procedures.
As the chassis shortage developed, the new tankers began to deliver higher container volumes. Long lines of trucks soon formed as drivers tried to get chassis and containers. The truckers began to lose revenue, since they could not serve as many customers due to delays. To offset losses, the trucking companies passed along additional charges to their customers. The inability to efficiently move containers from the port also slowed other port work, such as tanker unload time. Cargo that normally took two to three days to clear the ports faced lag times of up to two weeks. Shipments of some goods, such as coffee, began to be diverted from the West Coast to other ports, like Houston.
While these issues hamper normal port operations, simmering labor issues became more problematic. West Coast unions came into conflict with port management over wages and benefits. The unions were accused of organizing work slowdowns and refusing to dispatch sufficient skilled workers to offload ships. The port management reportedly refused to bring key executives to the bargaining table and indicated it would soon limit the amount of union labor to be employed.
Many of the port trucking companies also began to experience labor problems. The main issue here focused on the definition of “independent contractors,” a disagreement considered significant enough to bring California’s government into the mix. The state is examining the fairness and legality of independent contractor agreements. Of course, the state itself is responsible for some of the stress of independent contractors who are in conflict with trucking companies. It launched clean air restrictions on truck emissions, which forced small trucking companies to either update their vehicles, to become clean air compliant, or to stop operating. Many of the small companies continue to struggle with the investment.
It all adds up to a confusing picture, one that could take most of 2015 or beyond to resolve.