West Coast Lockout Costing $1 – $2 Billion a Day

This past week’s failed contract talks between dockworkers and shipping lines are costing the U.S. economy dearly. Estimates range from $1 Billion (by economists at Indiana University and UC Berkeley) to $2 Billion (by the president of San Francisco’s Federal Reserve Bank).

Countries worldwide are beginning to feel the crunch. The lockout at 29 ports is affecting the globe in multiple areas. Over 125 ships are waiting. Truckers are sitting idle in California waiting to load or unload. Railroads have stopped rolling due to backups. Farmers’ harvests are piling up. Manufacturers are running out of inventory. Imports and exports of perishable items are rotting.

The situation has grown so dire that The National Association of Manufacturers is calling for the help of President Bush. Many fear the economy could further stall if the strikes continue much longer.

Air Freight Alternative

Just-In-Time inventory systems, used by manufacturers to cut costs, are worsening the problem. An automobile assembly plant, owned by Toyota and SCRC member GM, had to be shut down Wednesday because there were no more parts. They will start air-freighting in parts in order to get back to production on some lines next week.

Air-freighting car parts? You bet. And other parts as well. UPS and FedEx have both announced an increase in flights to Asia in order to pick up cargo business. Unfortunately for customers, an increase in demand also means an increase in prices. Reports of 30% increases in air-freight rates since the end of September are surfacing – and air is already more than 10 times as expensive as sending via the ocean. This alternative only makes sense for the smallest, lightest, most perishable, and highest-value products.

The ports shipped 253 million tons of cargo last year – $320 Billion worth, 20 times more than in 1970.

Lockout Update – 10/16/02

The West Coast Port Lockout is over for now, lasting 10 days and costing upwards of $5 Billion dollars. President Bush invoked the Taft-Hartley Act on October 8th, providing an 80-day solution to the shipping backlog. If negotiations are not settled by then, the lockout could resume.

More than 200 container vessels are still being unloaded and, though longshoremen are back to work, productivity is below normal. Supply chains across dozens of industries are experiencing slow progress in recovering from the backup. EBN Online reported “the National Association of Manufacturers found that 71% of 243 surveyed members have been directly affected by the shutdowns and 11% of them, as of last week, had to curtail or cease production.”

The automotive industry has been especially hard hit, with many assembly plants across the nation requiring slow-down or closure. However some industries, like computers and electronics, have not seen major fallout from inventory shortages – yet.

The SCRC team will continue to update the site as further developments occur with the lockout.

Related to this topic, a featured speaker at the 6th Semi-Annual Member’s Meeting in December will be Erik Stromberg from the North Carolina Ports Authority. Be sure to attend and pose any questions you may have.