Port of Los Angeles Executive Director Gene Seroka sits down with Yahoo Finance Live to discuss the easing of supply chain backlogs at West Coast ports, quickening turnover of cargo, and the latest developments in labor negotiations with union workers.
DAVE BRIGGS: It's not every day that Los Angeles gets news of less traffic, but that is indeed the case. Unfortunately, it won't help you with your morning commute much. Check out the view of the Port of Los Angeles in 2021-- massive backups of container ships. The Marine Exchange of Southern California posting this picture just last week, showing a relatively clear view. Gene Seroka, Port of Los Angeles executive director joining us now in studio. Good to see you, sir. Thanks for being out here on the other coast. It is dramatic. 109 ships in January, 7 this week. Is this good news or bad?
GENE SEROKA: No, it really is good news. And good afternoon to you both. We went from 109 down to 20 by the month of June, down to single digits by July, all while breaking records five of the first seven months of the year, nearly going box for box with our record setting 2021. The difference? Getting that cargo off the terminals and into the American economy.
SEANA SMITH: So, Gene, does this have anything to do, then, with the pullback in consumer spending, a weakening economy, anything like that? Is that factoring in at all here?
GENE SEROKA: Not really. The last two months, we've seen a softening for two main reasons. One, importers brought in their cargo a little bit earlier than normal. June and July were our peak season months this year. They didn't want to get in the backups that they had witnessed in the last couple of years. And two, our dock workers' negotiation on a new coastwide contract with their employers' association is going on a little bit longer and slower than many would like. And importers have shifted cargo to the East and Gulf Coast, where we're now, unfortunately, seeing backups of ships.
DAVE BRIGGS: I do want to return to the employment labor status in a moment. But you're not seeing an overall lower demand internationally.
GENE SEROKA: No, not really. And here's why. July, August, and September consumer spending numbers were flat, but still elevated compared to 2019. We as consumers are still buying at a fairly high clip, compared to what we've normally been used to doing, even though we're spending more on restaurants, movies. And the airplanes are very full.
SEANA SMITH: Gene, you mentioned volumes are cooling some of those cargo ships now being directed to the southern ports or to the eastern ports. What are you doing or are you doing anything to try and recapture some of that demand?
GENE SEROKA: Oh, 1,000%. Both the employers and the union have put out two media releases jointly signed, unprecedented from my viewpoint, saying that we will not strike. We will not lock out our workers. Have confidence that these gateways will still work. And they are. Productivity has never been higher. So we're out knocking on doors, beating on the drum, making sure that folks know we've got a short amount of time left before the all-important retail holiday season. We've got to get the goods to market. LA is open for business.
DAVE BRIGGS: What are you seeing in the reduced costs of shipping globally?
GENE SEROKA: Really now it's getting interesting because that spot market rate has declined precipitously over the last several months. Now, in the Trans Pacific theater, running from Asia to the United States, most of that business is contracted annually. And some decided to go multi-year on their agreements. The spot market is not a majority of the business, but it does have an influence when these rates drop like they have on what folks are going to be looking at in the quarters upcoming.
SEANA SMITH: And Jim, we've talked a lot about the shortage of truckers in the past, also the headwinds when it comes to some of the rails and the ability to get some of the product out. Where do those headwinds stand? Are they still a big challenge for the Port of La?
GENE SEROKA: Yeah, the supply chain is always in need of improvement, constant movement forward. What we've seen right now is that earlier this year, the rail volume increased by six-fold. And we collectively, as an industry, have had trouble keeping up with that, until the recent eight weeks, we've seen rail volume idling at the Port of Los Angeles dropped by more than 50%-- same with those aging containers. I think we finally had the breakthrough on the rail that we finally needed. Truck volume is moving really well. The time a container sits at the Port of LA before it moves out by truck is at pre-pandemic times, meaning it's moving very fast.
DAVE BRIGGS: Circling back to the labor agreement, which expired in July, what are the big holdups? When do you expect the deal to get done?
GENE SEROKA: Collective bargaining is hard. This is really tough work. You're not only trying to put a coastwide contract together for all 22,000 workers and the 29 ports that they support, but with those 29 ports, you have all local issues that must be solved in parallel with the big coastwide agreement. There's going to be continued work. We've got seasoned professionals at the table on both sides. And as I mentioned, the service level has not deteriorated one iota. We'll keep moving this cargo and let these folks concentrate on getting this deal done. We'd like to see it done now so we can send that market signal that we're ready.
SEANA SMITH: Are you confident, though, you'll get a deal before yearend?
GENE SEROKA: That remains in question. And we're going to continue to work with all stakeholders. I know from the Biden administration through Governor Newsom's office, Los Angeles Mayor Eric Garcetti, and all of us pushing both sides to stay at the table and chip away at these issues. The sooner, the better for the American economy.