Gene Seroka, Executive Director of the Port of Los Angeles stated railroad delays and cutbacks contribute to the 29,000 rail containers currently sitting on the Port docks, which results in Port inefficiencies, delivery delays, and supply chain inflation. The railroads have reduced inland service to destinations such as Chicago due to backlogs at inland hubs caused by customer delays in retrieving containers and railroad manpower shortages.
According to the PMSA, Port rail container dwell times reached a record high of 13.3 days in June. As an incentive to free-up space, the SoCal Ports developed a congestion dwell fee on import containers dwelling 9 days or more. The fee would be imposed on Carriers (and likely passed on to importers and consumers.) The program implementation has been postponed since last fall and will be reassessed on Aug. 26th. As a consequence, private companies have established off-dock container storage yards near Port and Rail Terminals for the temporary storage of full and empty truck and rail containers pending further transport.
West Coast dockworkers and their marine terminal employers reached a tentative deal on health benefits in late July. This is a development that would seem to bode well for overall agreement on a new contract. The tentative terms of health benefits are subject to an agreement being reached on other issues that are part of the negotiations. While neither party has been discussing the issues under negotiation, marine terminal automation and ILWU job jurisdiction are believed to be the top issues.
As part of the state of California’s Warehouse Indirect Source Rule (ISR), warehouse operators are expected to implement emission mitigation programs such as solar panels, electric charging stations, zero-emission yard hostlers, and other on-site improvements at warehouse facilities. One company that could aid in addressing part of the ISR is Clean Energy, a Newport Beach based company, that develops Renewable Natural Gas (RNG) fuels for heavy-duty and medium-duty trucks. They currently have more than 570 fueling stations across the United States. Clean Energy’s Renewable Natural Gas (RNG) is a transportation fuel made from organic waste which drastically reduces carbon emissions by an average of 300% versus diesel, and at a fraction of the fuel cost. Unlike conventional natural gas, RNG is not a fossil fuel and does not involve drilling. For more information, visit the Clean Energy website.
J.B. Hunt, one of the largest third-party logistics companies in North America, announced it will open its first transload service facility to support international cargo along the West Coast in order to streamline its inland transportation.
Transloading includes the transfer of cargo from ocean containers to domestic containers or trailers for further transport inland by truck or intermodal rail. The contents of three 40' ocean containers can be transloaded into two 53' domestic containers thereby saving inland transportation costs, reducing container repositioning costs, increasing port drayage equipment fluidity, and bypassing elements causing port congestion.
The transload facility, which includes a 91,000 square-foot warehouse and 8 acres of parking for up to 300 containers, is located in the City of Commerce which is in close proximity to both port and rail Terminals.
The unions of both the west coast Port dockworkers and national railway workers are working without contracts. The International Longshore and Warehouse Union (ILWU), representing 22,000 workers at 29 West Coast Ports, including Los Angeles and Long Beach, continued in negotiation with the Pacific Maritime Association (PMA) which represents 29 west coast Ocean Carriers and Port Terminal operators. The previous contract expired on July 1st. The details of the negotiations are not public, but sources indicate the primary areas of issue are wages and workplace automation. In June, both parties issued a joint statement that operations would continue and neither party was preparing for a union strike or terminal lockout.
The group of unions representing 115,000 railroad workers, including the AFL-CIO, also continued in their negotiations with the Class I Railroads which include the BNSF and UP railroads serving SoCal Ports. They have been negotiating for over 30 months. The primary areas at issue include wages and benefits. In July, over 99% of the members of the Brotherhood of Locomotive Engineers and Trainmen (BLET) representing 23,000 workers voted to authorize a strike if necessary. According to the 1926 Railway Labor Act, the U.S. President was able to intervene with an appointment of a Presidential Executive Board which has until Aug.16th to issue recommendations, which must be considered by the parties for a 30-day cooling off period before a strike or work stoppage is allowed.
Nikola Motor, an Arizona- based manufacturer of heavy-duty commercial Battery Electric Vehicles (BEVs), began the series production of its Tre BEV Electric Class 8 truck in March. The company reported 2nd quarter revenues of $18 million, with plans to produce 300-500 trucks by the end of the year. Manufacturing capacity will grow to 20,000 trucks by the 1st quarter of 2023. A pre-production version of the zero-emissions truck has been in use by Total Transportation Services (TTSI) for SoCal port drayage since Dec. 2021. TTSI has committed to purchasing 30 more subject to CA Government funding assistance. The Nikola Tre has a range of up to 350 miles, 645 hp, GCWR of 82,000 lbs, a maximum speed of 75 mph, gradeability of 36 mph @ 6%, and an 80% recharge time of 120 minutes. Reported costs are in the range of $260,000 and qualify for limited CA rebates of up to $150,000. The Nikola Tre class is in competition with similar models by Tesla and Volvo, which have yet to begin production in the USA as of yet.
The Summer 2022 Allen Matkins/UCLA Anderson School of Business Commercial Real Estate Survey and Index forecasts a continued positive outlook for CA industrial space, with significant future increases in demand that will outstrip planned and projected 2025 supply. The biannual survey taken in late May 2022 compiles the views of real estate developers, owners, and investors within a three-year time horizon.
Current industrial development has continued at a torrid pace, barely keeping up with absorption. For example, all new 1.5 million square feet of industrial space delivered to the market in Los Angeles in the first quarter of this year was reported to have been leased. Over the past several years there have been consistently high occupancy rates and superior lease rate growth. In the latest Survey, overall sentiment remains positive with respect to increased yields and very low vacancy rates such as the below 2% rates in Los Angeles and the Inland Empire.
The Supreme Court’s June 30 decision not to hear challenges to AB5, originally aimed at ride-sharing companies such as Uber and Lyft, cleared the path for the California law to end the longstanding system of independent owner-operators dominating drayage at the state’s ports by forcing the drivers to either become employees of the trucking companies or set up their own individual companies. Frustrated drivers responded with a series of protests in late July, including one that forced the marine terminal at the Port of Oakland to temporarily close their truck gates
A worker classification dispute that drove FedEx to create an agency system for non-company drivers provides a window into how the trucking industry could respond to the U.S. Supreme Court’s decision that will force California drayage operators and drivers to adopt a new business model.
Despite just a modest rise in consumer spending nationally, the Port of Long Beach reported its busiest July on record with an increase in the movement of empty containers offsetting drops in imports and exports. The port moved 785,843 twenty-foot equivalent units last month, topping the previous July mark, set last year, by 13%.
While imports declined 1.8% to 376,175 TEUs and exports dipped .5% to 109,411 TEUs, those declines were offset by a 2.8% increase in empty containers that moved through the port – totaling 300,257 TEUs – port officials said.
“We are continuing to seek solutions to improve efficiency as a record-breaking number of containers move through the port,” Port of Long Beach Executive Director Mario Cordero said in a statement. “We hope to relieve some of the stress points by continuing to support a transition of the entire supply chain to 24/7 operations and ensuring our industry partners can track containers with our new Supply Chain Information Highway data solution.”