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Supply chains seeing ‘some semblance of normalization’: Port of Long Beach exec

Mario Cordero, Executive Director of the Port of Long Beach, joins Yahoo Finance Live to discuss supply chain stabilization and the outlook for the holiday shopping season.

Video Transcript

[AUDIO LOGO]

AKIKO FUJITA: Mario, good to talk to you. I think a lot of people are wondering-- we have the rail strike resolved last week, the next focus here is what's happening with the ports. Workers there have been working without a contract since July. What's the latest?

MARIO CORDERO: Well, the good news, Akiko, is that the workers continue to work day in, day out so the cargo is moving. In addition to that, I think it's fair to say that the supply chain now is moderating, so we're having some semblance of normalization. So I think it's all good news for the West Coast, particularly the Port of Long Beach and Los Angeles. The backup of vessels is very much diminished about 10 compared to 109 earlier this year in January. So I think it's all good news with regard to the supply chain.

AKIKO FUJITA: You have said publicly that this is not going to be a repeat of 2014, you're not going to have a prolonged strike per se a stoppage in work. When you think back to what happened with the rail strike last week, it was the White House that ultimately stepped in to try and resolve this-- that's where we stand right now. Is that your expectation with these negotiations too, and what conversations are going on with the White House?

MARIO CORDERO: Well, at least at this point, I'm optimistic that the negotiations between the two parties, IOW and the PMA, are moving forward. So I am optimistic they'll find a resolution. The rail strike was a little bit different. I mean, you're talking about a three-year impasse so to speak of discussions and negotiations-- in that situation, the White House did step in. But in this case, I'm still optimistic that we're going to have a reasonable resolution here within the reasonable period of time.

AKIKO FUJITA: A reasonable resolution mean no stoppage?

MARIO CORDERO: Absolutely no stoppage, no slowage. So again, the cargo is moving day in, day out, high productivity for us at the Port of Long Beach for the first eight months. We're up 4.6% than our record year of 2021.

AKIKO FUJITA: Meantime, we have seen reports of importers who are maybe optimistic, but sort of looking at contingency plans potentially moving some of the cargo away from the West Coast ports more over to the East Coast. Are you seeing that in Long Beach?

MARIO CORDERO: There is a percentile of that, absolutely. But again, once the labor negotiations come to resolution, some of that business is going to come back. So I'm not too worried about that in terms of the mid-term or even long-term. The San Pedro Bay complex will continue to be a competitive, strategic, significant gateway for this nation.

AKIKO FUJITA: You've obviously got a good pulse on the demand picture with all the freight coming in through your ports at a time when there's concern about easing demand, but also companies, retailers having to deal with inventory that's building up. What are you seeing and what does that tell you about where things are headed going into the holiday season?

MARIO CORDERO: Well, number one, what we're seeing now in terms of the consumer demand dissipating is what many of us predicted back in the spring. So you're starting to see that. The capacity issues, at least in the San Pedro Bay complex are much diminished. We still have capacity issues at the warehouses because of the advancing of the inventory. So I'm very optimistic that in the holiday Christmas season, I don't think consumers have anything to worry about in terms of the shelves being well stocked and all goods being available for the season.

AKIKO FUJITA: When you talk about capacity issues, I mean, what specifically are you seeing there and to what extent has the situation improved?

MARIO CORDERO: Well, what we did see earlier was the shippers or the BCO, Beneficial Cargo Owners, were advancing so much inventory for fear of not having a repetition what occurred in 2020. And so much so that it created capacity issues at the warehouse and the distribution centers. I think that's diminished.

You've seen Target, Walmart, and others announce a depletion of the inventory sales. So I think that's being addressed, and I think we're in a much better position to supply chain in Southern California than we were earlier. But the good news is that for the nation supply chain, I think again, you're seeing moderation in some semblance of normalization again.

AKIKO FUJITA: Certainly good news after what you've seen over the last few years. Getting back to the negotiations here, though, one of the key sticking points has been this concern about automation. Obviously with workers' wages a big question mark, benefits, as well. But the automation part has been a bit of a sticking point largely because when you think about where things are headed, there's concern about the security of the jobs. Where does that discussion stand right now?

MARIO CORDERO: Well, I'm not privy to the discussions. I'm not in the room discussing those issues. What I will say overall that it keep in mind that for us productivity is very important. I think on that metric, we're doing very well. 4% of the terminals throughout the world are automated or semi-automated. I'm not going to deny that's a subject of discussion in terms of the supply chain and the global terminals, but again, this is an issue that for us at the Port of Long Beach, we want to make sure that we keep the sense of productivity, which is so important.

So in conclusion, I'm more interested in cargo velocity in terms of how we move the container as opposed to what we've been discussing in the last couple of years of cargo volatility.

AKIKO FUJITA: What can be improved on that front when you talk about the velocity?

MARIO CORDERO: 24/7. I'm not going to step back from the vision that I believe that the good news. We have already three criminals in the St. Peter Bay complex. I have a hoot shift that is 3:00 AM to 8:00 AM. So gate expansion of operations is occurring. So I think, again, that's the good news. So I think for us, we need to kind of elevate the gate hours, the operation hours, whether it's truck gate or railroad activity. I'm optimistic in the future, we're making strides in that direction.

AKIKO FUJITA: Finally, you mentioned that consumers don't necessarily have to be worried about store shelves being stocked come holiday season, the big concern is really, how much consumers are willing to shell out at a time when inflation is still maybe not at the 40-year record, but still at very elevated levels. Big picture based on what you've seen and what you've observed, how significant is the slowdown?

MARIO CORDERO: Well, I think the slowdown in terms of consumer demand is not a significant. And, again, we're comparing year-to-year to record demand given what we experienced from 2020 going forward because of e-commerce, online buying. So I think it's-- the good news is energy prices have diminished, so to speak. There is a concern about the inflationary rate. I will then trust the Federal Reserve that has a plan of action to address that.

So I think, again, the good news for us is productivity continues, the demand is there. But again, we're comparing year-to-year. So I think going into 2023, we'll see what the Fed Reserve does and what that impact and results of that action next week and we'll go from there.

AKIKO FUJITA: Yeah, tough to compare the kind of records that you saw over the last few years.

MARIO CORDERO: Absolutely. Record year and for this, like I said, for the first eight months at Port of Long Beach, we're 4.7% above last year, so we may have another record year.

AKIKO FUJITA: OK, Mario, it's good to have you in the city here.

MARIO CORDERO: Well, thank you, Akiko.

AKIKO FUJITA: Mario Cordero, executive director of the Port of Long Beach joining us.