Business & Real Estate

California exports hit all-time high in 2014, but port slowdowns hinder shippers

Richard Coyle is president of West Sacramento-based Devine Intermodal, a trucking firm that ordinarily is busy transporting Central Valley agricultural commodities to the Port of Oakland for export.
Richard Coyle is president of West Sacramento-based Devine Intermodal, a trucking firm that ordinarily is busy transporting Central Valley agricultural commodities to the Port of Oakland for export. Devine Intermodal

California set an all-time record for exports in 2014, but West Sacramento trucking company president Richard Coyle was in no mood to celebrate that announcement on Thursday.

Normally, he’s overseeing a busy fleet of trucks shuttling merchandise from the Sacramento region to the Port of Oakland for export overseas. But in recent weeks, the executive of Devine Intermodal has watched as his business has throttled back to a parking lot of idled trucks, the byproduct of gridlocked conditions at West Coast shipping ports hampered by a months-long labor dispute.

“We cannot run our fleet because of the gridlock at the Port of Oakland. Both exports and imports are severely backed up and stymied, and now we are having to lay off drivers and staffers. ... Our revenue has been cut in half,” Coyle said Thursday.

Coyle said he will deliver the bad news by Friday morning to staff in Sacramento, Fresno and Reno: six layoffs and a reduction in hours for 20 more employees. “I hate to do it, but we’ve been holding on for as long as we can, and now it’s come to this.”

A months-long stalemate in contract talks between the Pacific Maritime Association and the International Longshore and Warehouse Union, both based in San Francisco, has clogged major ports in California and is having a negative economic impact on Central Valley growers and other Northern California businesses such as Devine Intermodal.

The recent port troubles stand in contrast to Thursday’s announcement that Golden State businesses shipped record amounts of merchandise valued at $174.13 billion last year, surpassing 2013’s record of $168.13 billion by about 3.6 percent, according to an analysis of U.S. Commerce Department trade figures by Beacon Economics, a consulting firm with Bay Area and Los Angeles offices.

Despite gridlock at California ports at the close of 2014, in-state firms shipped merchandise valued at $14.73 billion in December, up about 1 percent from the December 2013 total of $14.6 billion.

The Port of Oakland, which is the main shipping site for Northern California, has been profoundly affected, with activity slowed to a crawl, according to reports. Other California ports have been similarly gridlocked for weeks. In some cases, ships have been lined up offshore, waiting to unload containers at ports. The slowdown also affected deliveries of imported goods during the recent holiday season, when some retailers such as Lululemon and Macy’s reported delays in merchandise landing on store shelves because container ships couldn’t unload.

The PMA has blamed ILWU for slowdown tactics; the union claims the ports are poorly managed. Both sides accuse each other of dragging out negotiations.

Contract talks between the two sides began more than eight months ago but have repeatedly stalled. The contract expired July 1.

The full impact of the impasse on major Northern California agricultural industries is unclear, but it has definitely affected shipments.

Brandon Harder, a spokesman with the Sacramento-based Farmers’ Rice Cooperative, did not have specifics on the number of rice shipments affected, but said the port gridlock has created a widespread problem. “This is much broader than just the rice industry. ... Agriculture in California and across the country has been affected by this.”

Harder said about 50 percent of FRC rice – 5,000 to 6,000 shipping containers a year – is exported.

Because rice has a longer shelf life than blueberries, strawberries and other perishable fruits, he said, storing it over a prolonged time is not necessarily a crisis.

What is a problem, Harder said, is the potential harm to the reputation of California growers. “If we can’t ship our product out in a timely fashion to our customers, that reflects poorly on us.”

Coyle, recently named president of the California Trucking Association, said clogged ports have inhibited the ability of Farmers’ Rice Cooperative, Sacramento-based Blue Diamond Growers and Sunsweet Growers Inc. in Yuba City to move their products.

That’s meant overseas shipments of wine, raisins and other popular California-produced products have slowed considerably, he said. “Our trucking company specializes in hauling all of those commodities, and our fleet is parked and workers are being furloughed.”

On Wednesday, PMA issued what it called an “all-in” offer in an attempt to end the impasse. PMA represents port terminals and shipping lines. PMA CEO James McKenna said in a statement that a lockout could be instituted within five to 10 days if a contract agreement is not reached. That would shut down 29 ports stretching from San Diego to Seattle.

McKenna said a continuation of the crisis will inevitably lead to a lockout as the continuing stack-up of cargo and ships will become unmanageable.

“The system can only take so much,” he said.

ILWU President Robert McEllrath responded in his own statement, saying ILWU’s negotiating team “continues to meet in an effort to reach a fair contract that provides security for its rank and file and stability for the industry despite the propaganda and threats from PMA. I urge the membership to stay strong and united and ignore PMA’s propaganda. Together we will prevail.”

Later, McEllrath offered a sliver of hope, saying PMA and ILWU are “extremely close” to finalizing an agreement, adding, “We’ve dropped almost all of our remaining issues to help get this settled, and the few issues that remain can be easily resolved.”

Meanwhile, officials at the Port of Oakland issued a stern statement: “The West Coast waterfront labor impasse needs to be settled ... quickly. Importers and exporters are suffering significant cargo delays. Central Valley farmers can’t ship their produce. Small business owners can’t get goods to put on the shelf. Harbor truckers can’t do their jobs. Everyone is suffering. If the situation worsens, if West Coast ports shut down, the U.S. economy and the global supply chain will be jeopardized.”

Among those already feeling the pain is Jeff Donlevy, business development manager for Sacramento-based Recycling Industries Inc.

Donlevy’s company recycles and exports cardboard, newspaper and other paper products from four facilities in Sacramento and Yuba City. Much of what the company exports is headed for China, but the paper flow has been cut to a dribble by the West Coast port slowdown.

“It’s hurting us pretty bad,” Donlevy said. “To date, we’ve fallen behind on our shipments by about 5,000 tons over the last five months. At this point, we’ve had to get off-site warehouse space to store materials.”

Donlevy said other Northern California recyclers are in the same boat, including some who are looking to rent land to store materials that ordinarily would be steaming to ports abroad. He said that even if a contract agreement is announced or a port shutdown is brief, “it will take three months to get back to normal ... and that’s working at 150 percent capacity.”

The PMA-ILWU stalemate and the possibility of a West Coast ports shutdown dampened much of the good news in Beacon’s report, which showed year-over-year gains in all key California export segments in 2014.

Beacon said manufactured exports were up 3 percent to $112.5 billion for the year, keyed in part by a rally in shipments of aerospace products and computer equipment. Non-manufactured exports – chiefly agricultural products and raw materials – climbed 5 percent to $22.69 billion. Re-exports – typically, imported goods that undergo processing or manufacturing before they’re re-shipped – gained 4.5 percent to $38.94 billion.

“Importantly, these gains in the export and production of manufactured goods have finally translated into new manufacturing jobs in California,” said Jordan Levine, Beacon’s director of research. “Since hitting bottom in mid-2010, the state has added 23,000 manufacturing jobs, primarily in durable goods manufacturing.”

Call The Bee’s Mark Glover, (916) 321-1184.