The Breakdown

Explaining Southern California's economy

Ports of LA and Long Beach do brisk business given potential labor dispute

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Cargo volumes rose last month at the Ports of Los Angeles and Long Beach.  It’s good news, but the reason for the rise might be a little unsettling.

The Port of Long Beach had its busiest May since 2007, handling nearly 600,000 container units, 2.7 percent more than May of 2013.  At the Port of Los Angeles, the rise was more dramatic: 689,141 container units, an 8 percent jump over May of 2013.  

"We’re off to a good start here," said Port of Los Angeles spokesman Phillip Sanfield, adding that for the first five months of the year, cargo volumes are up 8.2 percent. 

But Sanfield said part of the increase in the last few months is due to a potential labor dispute.  Since May 12, The Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) have been engaged in negotiations for a new labor contract covering nearly 20,000 dockworkers at 29 West Coast ports.   The current contract expires at the end of June, so retailers are rushing to move goods early.

"Retailers do not want to be caught flat-flooted and not be able to have products for the consumers when they go to the stores," said Jonathan Gold, Vice President of Supply Chain and Customs Policy at the National Retail Federation. "So they look to put their contingency plans in place – either bring the product in early, [or] shift to alternate ports, either east coast, gulf coast, Canada, or even Mexico."  

At the Port of Los Angeles, Phillip Sanfield is happy his port is part of the first contingency plan.

"The good news for LA is it means that this cargo, which theoretically could be rerouted to other parts of the country is still coming here early which means the jobs still stay here," Sanfield told KPCC. 

Both Sanfield and Gold hope contract negotiators will reach a deal soon – or at least agree to extend the deadline.   Neither the PMA or ILWU is commenting on the status of contract negotiations.  The two sides released a joint statement June 4th saying that talks are on-going. 

"Shipper anxiety has everything to do with the cargo surges we've been seeing lately at the San Pedro Bay ports," said Jock O'Connell, an international trade economist who advises Beacon Economics.  But he cautions that moving goods early can be risky.

"In addition to the costs of financing excess inventory, goods not intended for immediate sale or use must be warehoused," O'Connell wrote in an email to KPCC. "If there is no strike or lockout, those costs will have been incurred unnecessarily."

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