Thursday, November 6, 2014

US Port News as Container Dispute Delays Freight and Joint Venture Abandoned

No New Jersey Partnership Meanwhile Union Troubles on West Coast Rumble Onward
Shipping News Feature

US – APM Terminals has announced that it will not pursue the proposed joint venture with infrastructure investor Brookfield Asset Management for the ownership and operation of APM Terminals’ Elizabeth, New Jersey facility, after no ‘commercially viable solution’ was agreed upon despite the best efforts of the two parties. Meanwhile the container shipping labour situation down the West Coast seemingly deteriorates further and freight remains gridlocked at the docks.

Proposed earlier this year in February, the joint venture company would have been equally owned by Brookfield and APM Terminals, with the two companies hoping that the partnership would strengthen their presence in the Port of New York and New Jersey. Speaking in regards to the failed talks, Eric Sisco, President of APM Terminals North America, said:

“APM Terminals and Brookfield worked closely with the Port Authority of New York/New Jersey to address the needs of each party. Despite the good faith efforts of all involved, a commercially viable solution was not achieved. Our Elizabeth terminal is our premier US east coast facility. We have operated in the port since the beginning of containerisation and we will continue to operate here for many years to come.”

APM Terminals will continue to operate its Elizabeth facility under its long-term lease with the Port Authority. On the opposite coast it seems that the breakdown in relations between the International Longshore and Warehouse Union (ILWU) and the West Coast port customers, in the form of the Pacific Maritime Association (PMA), which represents over seventy multinational ocean carriers and maritime companies, has deteriorated still further.

The Port of Portland has criticised both parties in the long running dispute saying they should work harder at revising the current, now expired, version of the 80 year old collective bargaining agreement between the two as it simply wasn’t working. The horrendous situation facing shippers in other West Coast ports, particularly Los Angeles and Long Beach, has been illustrated here previously but now the attitude from both sides seems to be hardening.

The PMA issued a statement recently claiming that congestion in the ports was caused principally by the ILWU breaking the existing agreement, a view described by the ILWU as ‘a bold face lie’. The ILWU goes on to say no such agreement was ever made, nor could it be made given the parties historic disagreement regarding the definition of ‘normal operations’ a disagreement it says has been the subject of arbitration for decades.

This situation has been simmering for some years and in an article in December 2012 we postulated that strike action at the time might be a ‘dry run’ by the union in advance of this year’s coming negotiations. The dispute bears some similarities to the ‘container royalty’ rows which plague East Coast port labour negotiations at contract renewal time.

On November 3, the PMA stated that the ILWU had initiated orchestrated slowdowns at the Pacific Northwest ports of Seattle and Tacoma, severely impacting many of the largest terminals during the peak holiday shipping season, these ports are responsible for 16% of West Coast container cargo. The mutually agreed target of July for settlement of these negotiations is now well past as the sixth month of negotiations for a new contract covering nearly 13,600 workers in 29 ports stretching from California to Washington drags ever on. The PMA also accused the ILWU of manufacturing reasons for the slowdown of work and said these unilateral actions were both common historically and illegal.

The PMA statement has been described as a major media offensive by the ILWU which places the blame for the two to three week delays at the ports now being seen by shippers on three key factors, including an element of ‘employer mismanagement’.The first accusation is that there was a decision by the employers to change the business model used to maintain and allocate truck chassis. Whilst it is true a shortage of haulage capacity is the major problem, if this refers to the introduction of legislation in 2010 by the Federal Motor Carrier Safety Administration (FMCSA), the PMA can hardly be blamed for several of its members withdrawing a service which had become a liability rather than a profit centre.

The second complaint is that there is a shortage of drayage drivers to shift the containers from the ports, although there seems to be a shortage of professional drivers in many areas local hauliers in California have reported recently that their equipment is at full stretch but it is the delays at the ports which are compounding the problems, any driver shortage is simply because those drivers working run out of hours of service whilst sitting waiting at the docks.

Lastly there is reportedly a shortage of rail cars for long haul boxes heading inland, and the ILWU quotes a recent Progressive Railroading article saying rail capacity has been stretched to the limit by additional shipments of crude oil, apparently oblivious to the fact that oil is moved in tank cars, not aboard intermodal container carriers, although these also are indisputably in short supply.

It is to be hoped that the two sides in this dispute can take a more adult attitude in the coming weeks and resolve the matter to the satisfaction of both parties, if not the consequences for the long term may well prove costly to all concerned.

Photo: The Hanjin Oslo discharges at Terminal 6 Port of Portland