Port of Oakland dispute backing up Sonoma County shipments

To get a sense of how the slowdown at the Port of Oakland is affecting North Bay businesses, one only has to stroll around Redwood Empire Disposal’s Santa Rosa recycling facility.

Crushed Coors beer cans. Squashed Arrowhead water bottles. Crunched pizza boxes. They are all bundled into separate categories - paper, plastic and metal - with bales stacked as high as 20 feet.

Trucks typically come around the clock to pick up the recycled products, most of which go to Asia to be turned into items such as metal for Honda vehicles, plastic Happy Meal toys and new cardboard boxes that are likely to get recycled again.

“Now it’s a trickle,” said Steve McCaffrey, director of Redwood Empire Disposal, which is part of the Ratto Group. The company serves about 90 percent of Sonoma County with its trash hauling service.

The immediate result of the port backlog that started in late October: The facility now has about 5,000 tons of the recycled products waiting for pickup where typically it has had a few hundred tons. “We have a mountain of product,” McCaffrey said.

The plant is lucky in one respect: it has plenty of space and isn’t scrambling for additional warehouses like trash haulers in the South Bay. But it still requires maintenance, McCaffrey said, such as putting a blue tarp over the paper products to ensure they don’t degrade in the rain or sun.

It also has had a financial impact. The bulk items are traded like commodities and recyclers pay when they receive the products. A delay on shipments means a delay in payments, disrupting the company’s cash flow.

“It’s not trash. This is our gold,” he said of the materials waiting to be recycled.

The slowdown, which is affecting all U.S. ports on the West Coast, has had a big impact for local businesses that rely on foreign imports and exports. Sonoma County companies exported $1.04 billion worth of goods in 2013, according to the most recent data from the U.S. Department of Commerce.

The delays are the result of combination of factors: increased consumer demand; a labor-management dispute; late and off-schedule vessels arriving from Southern California ports; and a shortage of trailers that carry the containers, said Marilyn Sandifur, spokeswoman for the Port of Oakland.

Some hopefulness emerged earlier this month when a federal mediator joined the contract talks in the dispute between the International Longshore & Warehouse Union and Pacific Maritime Association (PMA), which represents the shipping lines and the terminal operators. The PMA claims the union has staged a slowdown to gain leverage in negotiations, while the labor group contends the congestion is the result of poor decisions made by management, such as canceling night shifts to create more gridlock and turn public opinion against the workers.

The backlog has had a ripple effect through the global supply chain, especially trade between Asian countries. In one notable example, McDonald’s restaurants in Japan have suspended sales of large and medium-size french fries because of a lack of supply from the United States.

Orders for some products are now submitted more than a month earlier than normal. Some businesses have had to get extra supply space. Truckers are waiting hours on end to pick up their cargo. (On an average day, more than 2,000 trucks visit the Oakland port.) Ships have been backed up, and in fact, on Thursday four vessels were anchored in San Francisco Bay waiting to dock at the port, Sandifur said.

Central California has been particularly affected given its large amounts of farm exports. In 2013, almost a quarter of the Port of Oakland’s $13.9 billion in exports were from fruits and nuts. But Sonoma County farmers also have felt the impact. At Hunt & Beherns Inc. in Petaluma, the commercial feed and livestock store relies on organic soybean meal from China and Argentina and organic corn from Argentina, Turkey and Romania to serve area farmers and dairymen.

“We’re living on pins and needles,” said Bob Falco, co-owner of the store, noting he received a shipment of soybean meal last week that should have arrived 30 days earlier. “It makes life very unpleasant.”

Falco noted that he has worked to get some domestic soybean products from producers in Midwestern states that can be trucked to his store. But that comes at a cost: $320 to $400 more per ton, which must be passed on to consumers.

“We always try to get a decent supply on hand,” he said. “But there is very little supply out there.”

It also has reverberated across Wine Country. Large and medium-sized wineries are particularly affected by delays in shipping their wine out to foreign markets. The European Union and Canada represent about two-thirds of the market for California wine exports, according to the Wine Institute.

Prolonged delays could hamper outreach to foreign markets, especially the growing Asia market. For example, a Japanese wine store may want to stock a Chilean, Argentinian or Australian wine instead of one from California if the shopkeeper cannot rely on the supply chain to deliver the product in a timely fashion, said Tom LaFaille, vice president for the Wine Institute, a trade group that represents California wineries.

“It takes a long time to get back lost shelf space,” LaFaille said.

Wine-related suppliers that rely on imports have also been impacted. Bouchard Cooperages in Napa imports custom-made oak wine barrels from France for high-end winemakers who want to replicate the history and tradition of French winemaking. The business has seen an increase in its shipping costs, which it has had to pass on to customers. At least one North Bay trucking company last year started imposing a $100 surcharge per container because of the delays, such as the time drivers must spend waiting.

Concerned about labor disruptions at the port, Bouchard Cooperages placed its orders months earlier than usual last year to ensure it had barrels arrive before harvest in late summer.

“There was a lot of uncertainty,” said Kris Conemac, accounting director for Bouchard Cooperages. “It’s completely outside of your control.”

At M.A. Silva USA’s plant in Santa Rosa, the company imports its cork products from Portugal and about 18 million wine bottles from China, said Rich DuBois, the company’s product manager for glass bottles. Given uncertainty over contract negotiations, M.A. Silva decided to ship the corks from Europe through the Port of Houston, DuBois said.

“With the glass bottles we don’t have that option,” he said.

The company is experiencing a four-week delay and the backlog has affected when ships leave from China. The costs can mount quickly, as companies get charged if their container is at the port more than five days without being picked up, DuBois said.

It recently had 25 containers that were delivered by rail from Southern California ports to ease the congestion at the Oakland port.

Firms that do business with the Port of Oakland are likely to consider their options, said Jean-Paul Rodrigue, a professor of global studies and geography at Hofstra University in New York.

“They are going to start to rethink their strategy,” Rodrigue said. He noted that some businesses rethought their supply chain options after the 2002 lockout at West Coast ports, which cost at least $6 billion in economic impact, according to one estimate. Air freight could be one option as well as shipping to East Coast ports, as dockworkers there are represented by a different union.

The Port of Oakland is the third-biggest port of the West Coast, handling the equivalent of 2.4 million 20-foot freight containers in 2014. But it pales in comparison to the Los Angeles and Long Beach ports, which combined do roughly six times the business as the Port of Oakland. Oakland’s container activity has been relatively constant since the financial crisis.

In Sebastopol, Traditional Medicinals Inc. has already used air carriers to transport foreign-sourced ingredients that go into its organic and herbal teas, which are sold in grocery and wellness stores across the country. The decision was made in part because of the port disruption.

“We really rely on timely delivery coming from overseas,” said Ted Keys, the company’s assistant director of supply chain. “Any delay creates some havoc and potentially impacts our ability to get our shipments to customers on time.”

The company sources its ingredients from 35 different countries, such as getting its chamomile from Egypt and its licorice from Kazakhstan. Keys said the company is considering whether it is feasible to ship materials into East Coast ports and truck the containers to Sebastopol, as the cost may be the same and the delivery potentially could be quicker.

“It’s kind of like our Plan B or Plan C,” he said. “We need the reliability.”

You can reach Staff Writer Bill Swindell at 521-5223 or On Twitter @BillSwindell.

Bill Swindell

Business, Beer and Wine, The Press Democrat  

In the North Coast, we are surrounded by hundreds of wineries along with some of the best breweries, cidermakers and distillers. These industries produce an abundance of drinks as well as good stories – and those are what I’m interested in writing. I also keep my eye on our growing cannabis industry and other agricultural crops, which have provided the backbone for our food-and-wine culture for generations.

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