Labor dispute at ports hits state manufacturers, farmers, even recyclers
Apparel manufacturer Nature USA usually has enough raw material to keep its factory humming for 10 weeks. But with its next shipments stuck in limbo outside the ports of Los Angeles and Long Beach, the Rancho Dominguez company will start running out of yarn in a month.
That could be disastrous for the company, which knits, cuts and sews clothing for customers across the nation. In the fast-paced fashion industry, delays can translate into canceled orders or shortened time on store shelves — a big threat to Nature USA’s business, President Mike Farid said.
“Yarn is our main ingredient,” Farid said. “Temporarily we can move things around and replace things, but if this continues, basically I can’t see anything but a shutdown.”
A months-long labor dispute between dockworkers and employers has snarled ports along the West Coast. Some 20,000 members of the International Longshore and Warehouse Union have been working since July without a contract while their union negotiates with the Pacific Maritime Assn., which represents major shipping lines and cargo terminal operators.
The stalemate is hobbling businesses in California and beyond — manufacturers, farmers, retailers and even trash recyclers waiting to receive goods or export products using ships idling at 29 ports along the coast.
Automakers have warned that the port impasse would slow production at U.S. factories while they wait for parts. A Midwest fruit distributor tweeted that it fears running short of blueberries and pineapples because products are stuck on the docks. Meat and poultry exporters are being hit with an estimated $40 million a week in lost sales and extra costs, with up to $45 million in weekly hide and skin export sales lost, according to the North American Meat Institute.
It’s a serious problem especially for those who depend on the Los Angeles and Long Beach ports, the nation’s largest cargo container complex, which handles about 40% of U.S. imports and moves about $1 billion in goods a day during normal operations.
Over the holiday weekend, employers halted cargo unloading, a move that the union contended was to pressure dockworkers into agreeing on a contract. Unloading resumed Tuesday as Labor Secretary Thomas Perez met with negotiators in San Francisco, but dozens of huge cargo ships remained stranded off the coast from San Diego to Seattle.
The port stalemate is devastating for some farmers, particularly in California’s $2.4-billion citrus industry.
This time of the year, more than 25% of the crop is meant for export. But delayed shipping has left navel oranges and lemons rotting on ships. Chinese officials have started refusing all citrus from Tulare County because they received decayed fruit, said Joel Nelsen, president of California Citrus Mutual.
“This is one of the most challenging seasons we’ve faced in a quarter of a century,” he said, noting that exports are down 60% from the same time two years ago, when growers exported $385 million worth of oranges and $109 million of lemons.
Packers have cut worker hours, and picking has slowed or stopped. Stranded fruit may flood the U.S. market, dragging down prices. Other countries are moving into foreign markets that U.S. growers can’t reach because of the port logjam; Egypt, for example, is shipping oranges to South Korea.
“When we lose customers, it takes us years to get them back. We’ve seen that after the freezes,” said Bob Blakely, vice president of the citrus trade group. “This is a train wreck.”
Companies are scrambling to figure out a Plan B and are bracing for huge losses if the fight continues or escalates into a lockout or strike.
Nature USA gets its raw materials from overseas, which workers and machines then turn into fabric and clothing at its Southland factory, Farid said. Domestic distributors found in recent months can provide only about half of what the company needs, and those sources are drying up as well.
On the East Coast, ports are also slammed with companies desperate for an alternative — prices have shot up from an average of $2,000 per container to more than $6,000, Farid said.
“Even if you are willing to pay that, and we are willing to pay, they can’t give us a date because they are booked up,” he said. “We can’t give delivery dates to our customers, our customer can’t give delivery dates to retailers, you are in this utter chaos.”
The company is looking at a partial shutdown if it doesn’t get more yarn in the next four weeks. “There aren’t any options, there are no contingency plans,” Farid said. “There is nothing we can do.”
Pacific Play Tents and Stansport Inc., based in Los Angeles, are in a similar bind.
The camping equipment companies have more than $2 million tied up in tents and other gear stacked inside 38 containers on the water near the L.A. and Long Beach ports, said Brian Jablon, executive vice president of the businesses.
“You basically are held hostage until you get your containers,” said Jablon, adding that shipping companies are also charging an extra $1,000 per container to cover extra expenses on ships idling in the water and unable to unload.
Redirecting ships through the Panama Canal to Houston or elsewhere costs an additional $2,000 a container for extra freight and trucking costs, he said.
Uncertainty is the worst part, Jablon said.
“It’s like trying to drive a car with a blindfold,” he said. “When my retailers say, ‘When are you going to deliver?’ My response is, ‘I don’t have any more crystals in my crystal ball.’”
Stansport and Pacific Play Tents are considering tapping into a line of credit at their bank, the first time in their history, Jablon said. Other options include voluntary furlough days for the 46 or so workers, or requiring employee contributions to health insurance, which is 100% employer funded now.
“We told them you are probably not going to get bonuses,” Jablon said. The goal is to avoid layoffs, he said.
Port congestion is clogging operations of typically under-the-radar industries — such as recyclers.
City Fibers, which ships massive amounts of paper, plastic and metal all over the world, has been renting extra space since autumn to house the backlogged material, said Brett Jones, director of sales and procurement.
The Los Angeles company usually exports about 10,000 tons a month, but that fell about 40% in the last three months of 2014, Jones said. The sales decline combined with the extra warehouse costs meant City Fibers lost money in the last quarter.
If the stalemate drags on into spring, City Fibers may be forced to cut employee hours, and potentially even stop accepting the lowest-value materials that only countries in Asia will accept.
“China consumes the developed world’s scrap and raw commodities,” he said. “If you can’t get to the world’s largest consumer, then it becomes a problem.”
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