With rail network congestion improving in some of the nation’s grain belt, Union Pacific Railroad and BNSF Railway are facing another prospective headache: a shutdown of the port complex of Los Angeles and Long Beach, the country’s largest.
Omaha-based Union Pacific Railroad says a work slowdown by the the International Longshore and Warehouse Union on the California waterfront is hurting international volumes of cargo containers that travel by ship, rail and truck.
BNSF Railway, owned by Omaha’s Berkshire Hathaway Inc., said the labor dispute needs to get resolved before the economy begins to register damage.
Intermodal traffic — or cargo containers that travel via more than one method — is a large part of U.P.’s business, accounting for 20 percent of annual freight revenue last year. At BNSF, the consumer-products unit that includes intermodal freight accounted for 32 percent of freight revenue through September.
The dockworker union has been in negotiations with the Pacific Maritime Association, which represents shippers and ports, since early 2014 over pay and benefits. A federal mediator was appointed this month, but not much has been accomplished toward a new contract.
Affected are 20,000 West Coast dockworkers who are the first to handle to imported goods and the last to handle exports, much of it at some point also carried by U.P. and BNSF.
“We have not seen anything to indicate the mediator has helped or not,” U.P. Chief Executive Jack Koraleski said in an interview Thursday.
If the worst happens — a shutdown of the port complex handling 40 percent of U.S. containerized cargo — Koraleski said U.P. will enact an embargo, refusing to haul cargo destined for the Los Angeles and Long Beach waterfronts. That, Koraleski said, will prevent a domino effect that would delay rail shipments far inland.
“We will do everything we can to protect the integrity of our network,” said Koraleski, whose railroad operates 32,000 miles of track in 23 Western states.
Union Pacific has invested heavily in serving the port, operating the closest rail cargo terminal to the docks, the Intermodal Container Transfer Facility, four miles away. Union Pacific has three other terminals in the Los Angeles area. In some
cases, U.P. trains roll right up to ship piers.
With an embargo, U.P. would seek to keep unhandled freight on the West Coast from causing traffic jams all along the network.
“There is so little slack in the global transportation system, the railroads can’t risk having traffic backed up halfway to Omaha because of port problems,” said Joeseph Schwieterman, a transportation professor at Chicago’s DePaul University.
BNSF spokeswoman Amy Casas said Friday that “unresolved labor issues” at the port complex of Los Angeles and Long Beach have the potential to cut into business at its intermodal terminals in both Los Angeles and San Bernardino. Cranes at the two make 1.5 billion container lifts a year.
“In this fluid environment, we continue to work with our customers and terminal operators to keep resources and freight moving, advising them as conditions change,” Casas said. “BNSF urges the parties involved for a prompt resolution so that marine terminal productivity and supply chain flows can be restored to the levels necessary to avoid further disruptions.”
Some shippers say the port slowdown is starting to register. ConAgra Foods CEO Gary Rodkin told analysts Dec. 18 it has been “mildly disruptive” to the the Omaha-based packaged foods company’s international shipments. Omaha-based ConAgra’s Lamb Weston Idaho-grown potato products are shipped to Asian fast food restaurants via West Coast ports.
“We hope it’s resolved soon, but it could be more of an issue as the year progresses,” Rodkin said.
Ed Lipsett, director of the Nebraska Furniture Mart Texas store under construction in the Dallas area, said, “We’re like everybody else, there have been some challenges getting some containers in from the West Coast. We don’t think it’s going to be a hindrance to our store opening. We built a lot of time in for circumstances like that.”
As attention turns to the West Coast ports, rail service in the upper Midwest has improved, according to one shipping coaltion, after a harsh 2014 winter, spring floods and record grain and oil shipments from the region strained both U.P. and BNSF.
“Railroads are proving that the sizable investments made over the past year continue to yield results for agricultural customers,” said Mike Steenhoek, executive director of the Soy Transportation Coalition. “Almost all indicators of rail performance included in our surveys are highlighting sustained improvement.”
The soybean shippers said this week that 91 percent of participating grain handling facilities report that service response from railroads is faster than a year ago, with 61 percent recording no rail orders past due.
World-Herald staff writer Barbara Soderlin contributed to this report.
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