Import cargo at U.S. major retail container ports is returning to normal levels, and officials are preparing to count votes for the ratification of a new West Coast labor agreement, according to the monthly Global Port Tracker report from the National Retail Federation (NRF) and Hackett Associates.
The ports examined in the report handled 1.73 million Twenty-Foot Equivalent Units (TEU) in March, representing a record high and up 44.9% over the previous month and 33.1% year-over-year. One TEU equals a 20-foot-long cargo container or its equivalent. According to the report, recent labor disputes led to a large backlog of cargo ships waiting for unloading and discharge.
Higher Capacity = Lower Shipping Rates
But despite normalizing labor conditions, shipping capacities are on the rise, creating increased competition that could lead to significantly lower rates. The Global Port Tracker forecasts the first half of 2015 at 8.8 million TEU, which represents an increase of 6% in shipping capacity over the same period in 2014. This increase could be due to ship owners launching an excessive number of large new vessels that could lead to shipping rate wars, according to Hackett Associates Founder Ben Hackett.
Advertisement
“This upsets the supply/demand balance,” said Hackett. “There is not enough demand to justify this level of capacity increase. Expect rates on both coastal services to fall to all-time lows.”
Rebounding After Yearlong Contract Dispute
West Coast ports faced significant congestion issues when a labor agreement between the Pacific Maritime Association and the International Longshore and Warehouse Union (IWLU) expired in July 2014. The two organizations reached a tentative agreement for a new five-year contract in February 2015, and IWLU will count ratification votes from its members on May 22.
“Dockworkers and management made a massive push to clear the backlog of cargo over the past several weeks and West Coast ports are getting back to normal despite concerns such as the Teamster picketing seen in Los Angeles and Long Beach earlier this month,” said Jonathan Gold, VP for Supply Chain and Customs Policy, NRF. “We hope to see this month’s ratification vote go smoothly and then settle into a long period of efficient, dependable operations before we have to think about contract talks again. But there are still plenty of other issues impacting congestion that the ports need to work through.”
