Giving war a chance: Is there another way to achieve affordable 24/7 terminal operations at major ports?
 Now that Covid mania is on the run, perhaps it is time to resurrect thoughts expressed by Jeremy Nixon, chief executive of the Japanese-owned, but Singapore-based Ocean Network Express (ONE), that combination of the container units of Japan's Big Three, MOL, NYK and "K" Line.
Addressing the Trans-Pacific Maritime conference in Long Beach earlier this year, Mr Nixon voiced the complaint expressed by the vast majority in world shipping - the wretched state of North American container terminal operations, warehousing, chassis handling and their lack of 24/7 operations.
Only last month, it was revealed that North American major port performance - expressed as vessel turn times - lagged behind most everyone in the global Container Port Performance Index (CPPI) developed by the World Bank and S&P Global Market Intelligence.
Worst of all were Los Angeles and Long Beach of the 370 major ports surveyed. Other major ports, including Savannah, Seattle, and Vancouver, as well as Rotterdam, Felixstowe and Hamburg, were among the lower rankings alongside Durban and Cape Town, which have been consistently among worst in the world.
Top performer was Saudi's King Abdullah Port, which achieved an average of 97 container moves per hour against 26 moves per hour at the main ports on North America's west coast. Coming in second was Port Salalah in Oman, then came Hamad Port in Qatar and Khalifa Port in Abu Dhabi rounding out the top five. Shanghai (Yangshan), Ningbo and Guangzhou were in the top 10.
The survey details Mr Nixon's beef. And it is waterfront aspect of the problem that consumes the attention of his ocean carrier brethren. Trouble is, limiting himself to this area, he barely touches on the overall labour problem that extends to railyards, truck depots and distribution centres landside.
Much of what Mr Nixon complains of, resulted from the unnecessary Covid scare, during the course of which, shippers were panicked into shipping whatever they could as fast as they could before authorities imposed lockdowns that seldom if ever came - except in China where a mania took hold and became a panic pandemic. Shenzhen's Port of Yantian shut down because someone got the flu! Can you imagine anything so idiotic!?
Turning to Mr Nixon's concern and what appeared to be a sound list of suggestions, one notes there is a failure to consider one serious factor - unforgiveable in an industry so fixated on cost - and that is, the ultimate expense of what he proposes, however laudable his objectives.
The big problem is the desire for 24/7 waterfront operations, which to be effective, should become universal at relevant points in the supply chain. As it stands members of the International Warehouse and Longshore Union, who monopolise dock labour on the US west coast, already earn six-figure wages - as much as a hospital doctor or an FBI agent for what amounts to unskilled or semi-skilled labour. When you start paying double and tripling pay that would be necessary to fulfill the dream of round-the-clock port operations, the seemingly sensible project becomes prohibitively pricey.
Mr Nixon focused on the difference between Asian terminal operations and those in the United States following the Covid crisis and the surge in imports that began flowing from Asia to US ports in July 2020.
He noted the huge gap in the efficiency and productivity of cargo-handling between Asia and the US, blaming Americans for supply chain problems because of insufficient investment in supply chain operations and to rationalise this with just-in-time methods that did not provide a buffer for the shortages and bottlenecks that have plagued the United States since 2020.
Mr Nixon compared container terminal productivity between the United States and Asia and noted the failure in North American to work 24/7. “Asia works 24/7 so 168 hours a week and the terminals are working 24/7 and the ships are working 24/7. We come to the ports here, we took LA/Long Beach as an example, and we step down to 66 per cent of that. So, we go down from 100 per cent of operating hours to 66 per cent of operating hours. So, then we get down to the terminal gates and work has been done on that recently but back then we were only getting 52 per cent of (Asian) production," he said.
"Then we go inland and we have further challenges on availability of working hours in the DCs and warehouses. We thought things would bounce back but North American ports don’t have the capacity that we have elsewhere in the world. So, we said a number of things have got to change, but here we are a year later and we’ve still got these challenges.”
As Mr Nixon points out, these productivity failings created a type of domino effect that resulted in supply chain dislocations that have caused shortages in stores and price inflation. Because of Covid, there is more to it than that, but he's got to the salient problem in plotting a way forward.
At the core of it, is the state of terminal operations, which when they are operating without problems are reasonably efficient. One has legitimate complaints about the provision of chassis from the get-go. The fact that ILWU members have bullied their way into the jobs - a completely unnecessary baroque and rococo extension of union featherbedding, safety-checks on chassis clearing them prior to terminal departure - is an outrage. But it is just one more thing blocking the way to Mr Nixon's laudable dream - shared by millions - of having a working supply chain which workers are paid wages commensurate with their skills, standards that are applied consistently throughout the supply chain from door to door.
A contributing factor that impacted agricultural exporters in 2021 was that some shippers began transloading more containers so as to reduce the supply of empties to the Midwest where agricultural exporters were waiting for them.
Many shippers pulled back from using maritime containers due to problems with rail ramps and instead did “more of their own transloading operations. Unfortunately, this meant there were less maritime containers going to farm country and fewer boxes available for export.
"Maybe we should have been more proactive and kept our containers coming to the Midwest. But there were many issues for why that was not so straight forward," he said. “Unfortunately, the freight rates on the North American exports don’t justify us moving empty equipment from the coastal areas inland.”
Mr Nixon said it was unfair to say that capacity was moved from low-priced markets to the higher priced North American market: “That may or may not be a fair argument”, but the result has now forced up prices in Africa and those trades that lost shipping.
He acknowledged the big problem with this ideas somewhat obliquely. The ILWU contract with the Pacific Maritime Association will soon expire. Nixon fears a slowdown or a strike crippling the supply chain doom any hope of supply chain recovery.
“The last thing we want is a human-made roadblock. We can already see quite a switchover to the east coast from west coast and unfortunately the east coast is about to jam up,” he said.
But is this truly the case? Is it the thing to fear or is it the thing to embrace? Giving conflict a chance may be the only way of securing 24/7 terminal operations from sea to shining sea.
One must ask whether there is more to fear from accepting a grudging armistice with the ILWU and inevitably the east coast International Longshoremen's Association (ILA), which put 24/7 supply chain and terminal operation forever beyond reach and confined to a dreamy wish lists of CEOs and wistful speculation at shipping conferences worldwide. |
