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30% of Logistics Decision-Makers Aren’t Sure About Resuming West Coast Trade

The West Coast port congestion that dominated the past couple years and a dockworker labor contract still hanging in the balance are scaring logistics managers away from fully recommitting to the region, data suggests.

Thirty percent of logistics managers at major companies and trade groups say they aren’t sure how much trade they would return to the West Coast once the International Longshore and Warehouse Union (ILWU) reaches a closely watched labor deal with the Pacific Maritime Association (PMA), which represents employers, according to CNBC’s new supply chain survey.

In total, 40 percent of the 341 managers surveyed said they diverted trade from the West Coast ports, while 49 percent said they did not. Another 11 percent was unsure.

Of those who say they will bring trade back to ports including Long Beach and Los Angeles, 18 percent said they would restore 10 percent of their diverted trade—an indication that the East Coast and other alternative gateways will continue to see elevated volumes.

Twelve percent said shift 20 percent of the trade they initially moved away back to the West Coast, while another 12 percent expects to bring back 60 percent of their diverted trade. Nine percent said they would bring back half.

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While Los Angeles has long been the leader in total volume across major U.S. ports, with Long Beach typically coming in second place, shippers flipped the script over the summer. According to data from supply chain visibility software Project44, Los Angeles handled a total of 935,000 20-foot-equivalent units (TEUs) in July 2022, well ahead of the 786,000 TEUs exported out of and imported through Long Beach and the 776,000 TEUs handled by The Port of New York and New Jersey.

But just one month later, N.Y./N.J. took the lead at 843,000 TEUs, while Long Beach remained in second at 807,000 shipping containers. Los Angeles had swung all the way to the bottom of the three at 805,000 TEUs processed in August. Volumes across the board dipped further from September through October, but the East Coast ports didn’t experience quite the same decline as their West Coast counterparts.

As of October, the Project44 data revealed that N.Y./N.J. handled the most cargo volume by a wide margin, with 793,000 shipping containers moving through the ports. Los Angeles and Long Beach handled 678,000 and 658,000 TEUs, respectively.

The threat of an ILWU strike was the main reason the East Coast ports gained such ground, according to the CNBC survey. Negotiations have been ongoing since May 10.

Over half (52 percent) of those respondents feared the threat of a critical disruption, according to CNBC’s research. Approximately 40 percent cited both California’s Assembly Bill 5 (AB5) “gig worker” law, which concerns the employment status of truck drivers, and rail cargo delays.

The survey’s respondents included members of the National Retail Federation, the American Apparel and Footwear Association, the Council of Supply Chain Management Professionals, the Pacific Coast Council, the Agriculture Transportation Coalition and the Coalition of New England Companies for Trade.

With ongoing uncertainty around the West Coast ports, experts in the field haven’t found a consensus on a projected return to normalcy. Even as freight rates continue to fall and factories in China continue to reopen and return to pre-pandemic production output, just 19 percent of logistics managers surveyed by CNBC expect the supply chain to be functioning as it should in 2023. The highest percentage of respondents (30 percent) peg 2024 as the year that will bring a return to normal, while another 17 percent expect business as usual in 2025 or later.

There’s so much uncertainty among these industry players that 22 percent admitted they had no idea what the supply chain’s future holds, while another 12 percent say normal might be a thing of the past.

The external factors that have had worldwide implications on the global economy continue to leave their impact on the chain as well. Russia’s war on Ukraine followed by the tariffs on China-made goods initially imposed during the Trump administration were the top geopolitical events impacting the supply chain, followed by Covid-19, according to the CNBC survey.

On the labor front, respondents said they were worried about the mental health of their workforce as well as the shortage of skilled workers, further adding to the stress. Survey results cited these as problems: employee burnout (65 percent), shortage of employees with the right skills (61 percent) and hiring to address the skills gap (75 percent).