No smooth sailing despite ports deal

In his most recent State of the Union address, President Obama stated, “Twenty-first century businesses … need to sell more American products overseas.” This in turn will create well-paying, middle-class jobs right here at home. Yet the recent West Coast ports slowdown proved to be one big domestic impediment to achieving this objective. The knock-on effects of the labor dispute between the International Longshore and Warehouse Union and Pacific Maritime Association caused production lines across the country to slow, shipments to retailers to dwindle, and manufacturing jobs to be lost. It may be surprising to some, but the recycling industry is the perfect case study for the collateral damage caused by the ports dispute. In fact, scrap is the top export by volume out of the ports of Los Angeles and Long Beach.

The recycling industry is far bigger than just what people put in their blue bins and leave at the curb. It is a $90 billion industry helping to employ nearly half a million American workers. The U.S. exports more than 40 million tons of scrap every year, valued at more than $23 billion in 2013. This amounts to 30 to 40 percent of the industry revenue annually. We send commodity grade materials such as metal, paper, plastics, and electronics to more than 160 countries around the world including China, Turkey, South Korea, India, and Germany.

{mosads}While falling commodity prices are already hurting the recycling industry, the West Coast ports situation had an equally damaging effect on recyclers across the country. In 2013, more than 73 million tons of commodities, including 18.6 million tons of scrap valued at nearly $8 billion were shipped from California ports. To put that in perspective of California’s role in exporting, those figures amount to 43 percent of all U.S. recyclable exports by volume or 38 percent of the total when measured by value. When factoring in all West Coast ports, roughly $9.4 billion of scrap exports passed through.

In 2014, scrap exports from West Coast ports declined nearly 12 percent year-on-year to less than $8.4 billion. The slowdown in scrap exports from the West Coast became more pronounced as the year progressed and the port situation deteriorated. In December 2014, the value of scrap exports from the West Coast plunged 17 percent year-on-year, reflecting a year-over-year volume decrease of nearly 160,000 metric tons of scrap and a decline in scrap export sales approaching $130 million for the month of December alone. And despite the tentative agreement, the backlog created by the dispute is not

Fortunately a complete shutdown appears to have been averted as that would have been even more devastating. Using figures from 2013, before the slowdown, an estimated $25 million of scrap exports were put on container ships and sent overseas every day. This would have be lost each day the ports were shutdown.

Despite the deal, we still don’t know the long-term costs, many of which can be catastrophic. Key overseas markets for scrap exports from the West Coast last year included China ($4.2 billion), Taiwan ($1.1 billion), South Korea ($1.1 billion), Japan ($402 million), and Thailand ($200 million). These are critical and extremely competitive markets for U.S. scrap exports, especially at a time of slowing global growth, a stronger U.S. dollar, and falling commodity prices. Prolonged disruptions to U.S. scrap export shipments, such as those caused by the West Coast port situation, not only impact American recyclers’ current ability to sell scrap overseas but could result in permanent market share losses if overseas customers lose confidence in our ability to reliably deliver.

The port dispute hit much closer to home for many American workers. Scrap exports support 35,000 jobs in California, Washington, and Oregon, and hundreds of thousands more across the country that process, broker, ship, and perform numerous other roles in the manufacture of recycled commodities. Many of these workers lost their jobs or saw a reduction in hours as a result of the slowdown.

While the industry is pleased that an agreement was tentatively reached, it came at a very steep price. A price that will take several months from which to recover. Both sides must continue along the path of this newfound cooperation to ratify the agreement quickly and work to restore full operations and begin to clear the backlogs at the ports as soon as possible.

Wiener is president of the Institute of Scrap Recycling Industries (ISRI).