US west coast ports face rising costs while volume remains flat
Time:2015-07-20
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As a result, terminal operators are under pressure to increase productivity. Those terminals that are able to reduce the number of man-hours required to move containers will survive, but those that continue to pay increased man-hours will lose money and their existence will be threatened, reports Newark`s Journal of Commerce.
According to the Pacific Maritime Association (PMA), the number of man-hours paid by west coast terminals in May increased 22 per cent over May 2013, but the container volume that was handled in May was only three per cent higher than in May 2013.
The five-year contract that was ratified in May by the PMA and the International Longshore and Warehouse Union (ILWU) will raise the base wage rate by US$6.50 to $42.18 an hour by 2019. Employers calculate their total costs by including benefits will amount to $85 an hour.
Terminal operators, who were interviewed did not speak on the record, but they said the better, more profitable operators have an average productivity of 1.2 man-hours per container moved. The least efficient terminals are much higher than that.
Costs will continue to go up each year because the new ILWU contract calls for a wage hike each year. Although the contracts between terminals and their shipping line-customers normally call for increased charges each year, terminal executives say that since the recession of 2008-09, and the excess terminal capacity that resulted, they have been hard-pressed to charge the carriers more for services.
Some terminal operators in the US and Europe believe the only way to cut costly man-hours while handling incrementally higher box volumes is to automate their facilities, as it reduces wasted container moves and improves efficiency within the facility by separating vessel operations from gate openings.