California Apparel News

Even though retail imports will jump about 10 percent this year, congestion at the ports of Los Angeles and Long Beach should not be an issue.

New technology, an ample supply of dockworkers and a slower U.S. economy this year will keep things on an even keel.

But next year, several factors will converge to form “the perfect storm,” said industry experts speaking March 27 atthe annual “Pulse of the Port” conference, organized by the Port of Long Beach.

While 2007 looks like a banner year, experts are more cautious about 2008. They noted that the labor contract with dock workers, represented by the International Longshore and Warehouse Union, expires in July 2008. The last time the contract was up for negotiations, in 2002, there was a labor lockout at the docks for 11 days in October. That caused a backup of cargo ships that created havoc for many manufacturers trying to get their goods to stores by the all-important holiday season.

Imports have been growing at a phenomenal annual rate at the two ports, and they now account for 40 percent of the import traffic into the United States. But the ports only have a finite amount of land.

“This means the ports of Los Angeles and Long Beach are running out of space. And it is not in 10 years,” said Bill Rooney, managing director of Hanjin Shipping Co. Ltd., based in Seoul, South Korea. “It is in three to five years.”

The ports, he said, need to become more efficient in getting containers off ships and through the gates. Most overseas ports are processing 10,000 to 15,000 20-foot containers per acre while the West Coast ports in the United States are only processing 5,000 containers. “Technology is needed to allow a doubling of that through put,” he said.

That’s where labor comes in. In its contract negotiations, the ILWU needs to agree to many of the technology advances the ports of Los Angeles and Long Beach need to implement. “We believe labor can and needs to play an important role in terms of growth,” Rooney said.

In 2004, a major labor shortage also created chaos at the local ports. There were not enough dockworkers to handle the deluge of cargo containers coming to the ports. At one point, there were nearly 90 ships either anchored offshore or dockside at the two ports. Normally, there are between 35 to 50 ships docked.

Since 2003, the port labor force has increased 74 percent. In 2003, there were 6,598 registered dock workers and 3,670 casual workers, who are pulled in on a temporary basis when cargo flows peak. In 2006, there were 8,838 registered dock workers and 9,042 casual workers.

But many casual workers are not being given enough work to keep them around, said Ed DeNike, chief operating officer of SSA Terminals, which operates several terminals at the two ports,

“In 2004, we thought we had enough casual workers to be able to handle the volume we thought we were going to see,” DeNike said. “And again we are walking a fine line with these casuals. We have to make sure they work enough during the week to be able to support themselves, so that when we do need them, they are available.”

Experts applauded the PierPass program, started in July 2004 to open up the ports’ gates four nights a week and on Saturdays. About 36 percent of the ports’ cargo now is retrieved at night.

However, this is leading to peaks and valleys in pick-up activity. “We are noting that the terminals are pretty slow in the morning between 8 and 10 and very slow at night after 11 and 12,” DeNike said. “We feel a lot of the same truckers are working day and night. They go home early at night and come in late during the morning. As a result, the impact we could have with PierPass is diminished.”

Most of the approximately 10,000 to 12,000 truckers who retrieve cargo at the ports are independent operators who own their own rigs. Starting this summer, the Department of Homeland Security is mandating that all truckers entering the ports have a Transportation Worker Identification Credential, which requires a background check. Many feel that about 20 percent of the local truckers won’t qualify because they are believed to be illegal immigrants. The full program will go into effect next year.

“We are concerned about a certain percentage of the workforce being lost. It could be anywhere between 10 to 30 percent,” said Brian Griley, president of Southern Counties Express, which works with 130 independent truckers at the ports and local warehouses. “We are definitely short drivers, so any loss is detrimental,” he said.

Calm waters

With national retail sales expected to increase only about 4.8 percent this year, economists aren’t worried about a traffic jam at the local ports in 2007.

Alison O’Donnell, director of government relations for the National Retail Federation in Washington, D.C., expects sales to be soft during the first half of the year and then pick up during the second half.

“The big question is how the deterioration of the housing market will impact retail sales. Building material sales are down 7 percent over last year,” she said. “That will have a drag on other retail sales for the year.”

She also noted that consumers are becoming more fickle these days. They may splurge on a car purchase at a luxury auto dealer such as Mercedes-Benz or Lexus but then do their clothes shopping at a discounter such as Target. “They are trading up and trading down,” she noted. “They are a complicated consumer.”

She is predicting that retail sales will edge up only 4.8 percent this year, compared to a 6.3 percent rise in 2006.

Paul Bingham, an economist for Global Insight who tracks traffic at the nation’s ports, said he expects 2007’s port activity to be much like 2006, when cargo containers were quickly processed through Los Angeles and Long Beach. “The pace of growth has slowed, but we are still setting records,” he said. Traffic at the local ports is expected to rise about 8 percent to 10 percent over last year, as more goods are made in Asia, he said.

He also noted that retailers are spreading out their shipments of goods, much as they did last year. That means peak season is starting in July instead of August and peaking in October.

“Large manufacturers have said it is worth paying extra money to move imports earlier in the year,” he said, noting they are bringing in all-year items, such as underwear and socks, earlier to avoid peak–shipping season cargo fees. “Then they wait until the last minute to bring in that hot fashion item,” he said.