Cushman & Wakefield Research-- Outcome of West Coast-Longshore-Strife

1. Winter 2015/2016
OUTCOME OF
WEST COAST
LONGSHORE
STRIFE
A Cushman & Wakefield Logistics and
Industrial Services Special Report

2. 2
Outcome of West Coast Longshore Strife
It’s now been over six months since the longshore labor dispute affecting US West Coast
ports was resolved. What can we say at this point about the lasting impact of the disruption?
In particular, do we see evidence of significant cargo volume shifts away from the US West
Coast gateways? Spoiler alert: The ongoing impact appears to be modest, based on the
evidence through the now-completed 2015 holiday shipping season. But there is work to be
done by the ports to improve productivity and regain shippers’ confidence.
A quick recap of the events that unfolded:
• The contract between US Pacific Coast port employers (the Pacific Maritime Association, or PMA) and
longshoremen (the International Longshore and Warehouse Union, or ILWU) expired after its six-year term, on
July 1, 2014.
• Port productivity suffered through the fall of 2014 and into the early months of 2015, as both workers and
employers imposed slowdowns and restrictions.
• This occurred against a backdrop of port operational struggles with larger ships, chassis management changes
and container availability issues within terminals.
• The parties reached agreement on February 20, 2015, following White House pressure.
• A new five-year contract was ratified by union members on May 22, 2015.

3. 3
Long
Beach
Los
Angeles
The US Pacific Coast ports were generally impacted from
July 2014 through February 2015. The San Pedro Bay ports
of Los Angeles and Long Beach, leading gateways for US
imports from Asia, were modestly impacted through
October-November, but then hit hard: Long Beach was
down 22% in January and 24% in February (total loaded
TEUs, vs year-earlier month), while Los Angeles dropped
27% in January and 11% in February. Oakland and Seattle/
Tacoma were impacted as well, with sharp declines in
January and February.
Container handling issues had a sharp impact on exporters
and importers. The New York Fed estimated that the West
Coast disruption likely reduced real export growth by 1.5
percentage points during the first quarter of 2015. Delays
were devastating for individual cargo owners, whose
products could not make it to market on time. At one point,
as many as 30 container ships were waiting off the Ports of
Los Angeles and Long Beach — this in an industry where
fixed weekly sailings are tracked by the hour. Shippers and
industry representatives complained in a late-January Wall
Street Journal article: “It’s devastating;” “We’re running out of
storage space;” “We have lost business because all of that
product has a shelf life;” and “It’s been a nightmare for us.”
Response by Shippers
American Shipper magazine conducted a survey of irate
shippers in January and February 2015 regarding their future
plans for port gateways. Nearly all responded they had been
significantly or moderately affected (99% of retailers and 95%
of manufacturers). Not surprisingly, half of those who already
use ports on both coasts stated they would shift more volume
to Atlantic Coast ports. The concerns expressed had more to
do with operational issues at the West Coast ports than with
labor negotiations. And some have acted on these intentions.
US ports have now reported container shipping volumes
through the first ten months of the year. This data shows that
shippers did divert cargo to the East Coast ports, particularly
during the worst of the unrest and in the next few months,
roughly through April 2015. Under Armour, for example,
shifted its US gateway for East Coast DC-destined Asian-
sourced products from Long Beach to Baltimore in May 2015.
Under Armour, long an advocate for economic stimulus in its
home state of Maryland, noted that this change would mark a
return to use of the Port of Baltimore for its Shanghai-
sourced shipments. While not necessarily a direct response
to challenges experienced during the West Coast Ports labor
slowdown, Under Armour did note that this change would
present no detrimental impact to the 27-day transit time it
was currently experiencing bringing goods in through the
West Coast, and then shipping by ground to their East Coast
distribution and store facilities. As Under Armour’s U.S. sales
have grown, they also announced a new, 1-million square foot
distribution center in Mount Juliet, Tennessee (just outside
Nashville). This DC, set to open operations in early 2016, will
also be able to leverage inbound shipments to East Coast
ports, including Baltimore and Miami.
But despite some diversion of cargo, West Coast ports have
now largely recovered their lost momentum. And many
shippers did not change port gateways — Costco, for example,
the third-largest retailer in the country, stated in May that it did
not plan to shift any imports to East Coast ports.
LongBeachwasdown22%inJanuaryand
24%inFebruary(totalloadedTEUs,vs
year-earliermonth),whileLosAngeles
dropped27%inJanuaryand11%inFebruary.
Jan-Feb 2015
Change vs. year-
earlier,
total TEUs
Change in
market share
vs 10 selected
US WC and EC
ports, % points
PORT TOTAL TEUs
PCT
CHANGE
Los Angeles
& LB
-416,699 -18.2% -5.4%
Oakland -114,230 -30.5% -1.8%
Seattle-
Tacoma
-49,084 -9.7% -0.3%
Sub Total
USWC
-580,013 -18.3% -7.5%
US East Coast 227,587 +11.1% +7.5%
PEAK IMPACT OF US WEST
COAST PORT DISRUPTION
* USWC ports: Los Angeles, Long Beach, Oakland, Seattle,
Tacoma; USEC ports: NYNJ, Baltimore, Virginia, Charleston,
Savannah.
Source: New Harbor Consultants analysis of AAPA and port
website data.
FIGURE 1
22% 27%

4. 4
Outcome of West Coast Longshore Strife
The latest
container data
show the US
Pacific ports on
the road to a
recovery in share.
Who were the winners of the cargo that was diverted? East
Coast ports picked up much of the slack (up 11%), especially
Savannah. While Charleston also did extremely well, its
recent good fortune seems more broadly-based than just
related to West Coast problems. In addition, the British
Columbia ports (not part of the ILWU labor negotiations)
gained volume, especially Prince Rupert, which saw its
volumes skyrocket during the disruption. Houston, on the
Gulf Coast, benefited as well.
Road to Recovery
While still lagging their re-disruption average level, the
latest container data (Sept-Oct 2015) shows the US
Pacific ports on the road to a recovery in share (Figure
2). Indeed, in a sign of health, Long Beach reported that
its third quarter volume of more than 2 million TEUs was
the largest quarterly tally in its history. Moreover,
marketing and operational efficiency initiatives by the
West Coast ports are likely to support continued
reversion to historical patterns. For example, the recent
launch of the Northwest Seaport Alliance in Puget Sound
should help raise competitiveness.
Shifts in Container Services
The trend in ocean container services by port paints a
somewhat nuanced picture. Overall, the US West Coast
ports have lost 7% of their ocean services versus the
pre-disruption period (Figure 3). This is partly the result of
continued carrier consolidation and introduction of larger
ships. Yet on the East Coast, subject to these same industry
trends, the number of services has increased 7%. By
overseas region, this increase is all attributable to new
Asian services, some of which transit the Suez Canal.
58.4%
TRENDING BACK TO NORMAL ON THE US WEST COAST
0
10
20
30
40
50
60
70
80
WC ports’ share of 10 selected US WC
and EC ports, total TEUs
2103 Average Jan ‘15 - Feb ‘15 Sept ‘15 - Oct ‘15
Los Angeles
& LB
Oakland Seattle-Tacoma Sub Total
USWC
38.5%
53.2%
5.3%
6.1%
9.4%
10.2%
7.0%
10.3%
42.2%
43.7%
61.0%* WC: Los Angeles, Long Beach, Oakland, Seattle, Tacoma; EC: NYNJ,
Baltimore, Virginia, Charleston, Savannah
Source: New Harbor Consultants analysis of AAPA and port website data.
FIGURE 2
Overall, the US West Coast ports
have lost 7% of their ocean services.

5. 5
Looking Forward
What does the future hold? Ports operate in a highly-
competitive, capital-intensive, fixed-asset business. Life will
not get any easier, as shipping lines consolidate into a small
number of alliances that wield enhanced bargaining power
with ports, megaships require ever-deeper channels and
mightier gantry cranes, and congestion of trucks on local
highways and at terminal gates demands constant
infrastructure investment. Efficient planning and movement
of boxes within terminals, in relation to huge peak load/
discharge volumes from new vessels, is a challenge for all
US ports. Labor disputes will continue to arise, particularly
around contract expiration dates. But dock labor strife has
bedeviled ports on all US coasts, including the East and
Gulf Coasts, which experienced issues in 2013. Legislation
was introduced in the Senate in June to try to head off
future port disruptions by making it easier for the President
to halt port labor slowdowns as well as strikes, and allow
state governors to initiate federal back-to-work injunctions.
The Government Accountability Office also launched an
18-month analysis of West Coast ports’ service disruptions,
announced in April.
The East Coast ports will benefit, at the margin, from the
anticipated Panama Canal expansion, due for completion in
April 2016, and from harbor deepening projects to
accommodate the larger vessels. Gains, though, will likely
be limited to container flows between Asia and a relatively
narrow band of US inland points, particularly for lower-
value and less-urgent shipments.
Labor disputes
will continue to
arise, particularly
around contract
expiration dates.
40
Los Angeles & LB
New York/ New Jersey
Baltimore
Norfolk
Charleston
Savannah
Oakland
Seattle
45
34 32
38
3331
2725
3533
7 8
42
21 19
Note: Regularly-scheduled pure container services, with weekly call frequency.
Source: New Harbor Consultants analysis of BlueWater Reporting data.
Pre-Disruption (Apr ’14) Post-Disruption (Aug ’15)
FIGURE 3
Total Selected
West Coast
100 93
Total Selected
East Coast
134 143
WEEKLY CONTAINER SHIPPING SERVICES

6. 6
Outcome of West Coast Longshore Strife
Southern California remains a
large and growing regional
market with massive
distribution capabilities
that will ensure
continued container
traffic growth.

7. 7
Key Initiatives to Watch
The West Coast ports are on the move:
• Los Angeles and Long Beach have taken the
initiative in creating seven joint working groups,
under an FMC-approved agreement earlier this
year, to tackle peak operations and terminal
competitiveness. Southern California remains a
large and growing regional market, with massive
distribution capabilities that will ensure continued
container traffic growth.
• Oakland is expecting more longshoremen and
clerks, as well as Saturday gate hours, to raise
productivity and clear the remaining vessel
backlog.
• Seattle and Tacoma are busy consummating their
alliance by planning new megaship terminals,
expanding on-dock intermodal rail yards and
revitalizing marketing efforts.
Planning considerations
Shippers, meanwhile, are well-advised to bear
in mind the need for port diversification and
continuity planning:
• Spread cargo flows across multiple port gateways
and coastal ranges
• Work with supply chain partners to identify
alternatives, especially when disruption risk rises
• Cultivate ocean carriers, freight forwarders,
terminal operators and Class I railroads to stay
up to date on potential logistical bottlenecks and
viable alternatives
• Arrange air freight options, if feasible, should the
need arise
• Employ skilled logistics managers and software
tools to manage supply chain operations and any
needed diversions

8. Bethany Bailey
Managing Director, Strategy & Operations
Logistics & Industrial Services, Americas
Tel: +1 206 521 0236
bethany.bailey@cushwake.com
cushmanwakefield.com
David Bovet
Managing Partner
Tel: +1 978 610 6490
dbovet@newharborllc.com
newharborllc.com
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Copyright © 2015 Cushman & Wakefield. All rights reserved.
The information contained within this report is gathered from
multiple sources considered to be reliable. The information
may contain errors or omissions and is presented without any
warranty or representations as to its accuracy.