Industry leaders insist on end to future port disruptions

NRF President Matthew Shay and other speakers at TPM conference said the industry cannot allow the nation’s economy to be held hostage by a small group of parties with their own interests.    National Retail Federation President Matthew Shay decried the “near death experience” of shippers using West Coast ports over the past nine months and said the system of negotiating longshore labor contracts must change to ensure such disruption never occurs again.
   Speaking at the TPM 2015 conference in Long Beach Monday, Shay said it was unreasonable to allow a small group of people to jeopardize the livelihoods of so many attached to retailers and manufacturers that rely on the smooth functioning of ports.
   “It has to stop,” Shay said.
   Shay’s voice was one of many on the first day of the conference to bemoan the impact of acrimonious labor negotiations between the International Longshore and Warehouse Union and its employers, represented by the Pacific Maritime Association, on already congested West Coast ports. Speakers throughout the day, including the heads of influential transportation companies like Maersk Line and Kuehne + Nagel, said port productivity has to increase in order for North America to accommodate the larger vessels ocean carriers now favor.
   Martin Stopford, director of Clarkson Research Services, previously said these larger vessels could eventually hamstring carriers.
   “You can build a 20,000-TEU ship, but you’ll struggle to get value out of it,” he said. “We’re finding out if these ships are too big, because you have to fill them in good times and bad (to maximize their per-slot cost reductions). The very big ones will be quite taxing to operate.”
   Stopford said carriers need to rethink their model, though he said they often take more of the blame than they deserve for their predicament.
   “Any business that gets stuck in a low profit/high volatility trap needs to rethink its model,” he said.
   Later in the day, Maersk Line CEO Soren Skou said he doesn’t see the industry ordering vessels much larger than the biggest in operation today because the demand for such vessels simply isn’t there.
   He said Maersk would likely order ships in the future in a range of sizes, but also noted that the average ship in Maersk’s 600-vessel strong fleet is hardly different than the rest of the industry, despite its series of triple-E 18,000-TEU vessels.
   “Big ships are not the source of Maersk’s competitive advantage,” he said.
   Skou also emphasized a point he made on Sunday to American Shipper, that carriers must plan for low growth and excess capacity.
   “Carriers have to build a business that can sustain volatility,” he said. “You can’t build a company based on the idea that rates will go up year after year. We have to price so we’re not waiting for 10 years where something crazy happens and demand is higher than capacity. The industry would make sense if we only bought ships when we made money.”
   Meanwhile, JOC Economist Mario Moreno said the impact of port congestion had the effect of turning what would have been 7 percent U.S. import growth into negative growth in the first two months of 2015. Moreno downgraded his forecast for import growth for the year from 6.8 percent down to 1.7 percent, purely because of the impact of congestion.
   Most shippers in attendance said they expected it to take six months for the cargo backlog at Los Angeles and Long Beach to clear, with smaller groups expecting a timetable of one to three months.