U.S. Port Congestion Adds to Cotton Traders' Woes

Posted by Joseph Keefe December 9, 2014

U.S. merchants face delays of as much as a week to ship cotton from major West Coast ports, threatening exports to China, the world's largest textile market, ahead of a key Chinese deadline at month's end for imports to arrive.

Congestion has plagued West Coast ports for months, including Los Angeles and Long Beach, which are the two busiest container ports in the United States and together make up the top hub for U.S. cotton exports.

The delays result from shortages of key equipment and an increase in container sizes, and are happening as labor negotiations drag on at the ports.

While the congestion has eased since the end of the retail crunch last month, it has reached a critical point for the troubled cotton industry. Bales must land in China by end-December to qualify for buyers' 2014 import quota allotments.

The country buys a big portion of the 13 million bales exported by the United States each year. Some $1.56 billion of cotton was exported via Los Angeles and Long Beach through September, government data compiled by WorldCity Inc show.

The delays affect both imports and exports, said Port of Los Angeles spokesman Arley Baker.

One merchant said his containers were delayed by a week.

"I'm questioning whether it is going to make the deadline. The customer may not be able to take it," he said, noting that if canceled the cotton would sit in a bonded warehouse overseas until it found another buyer.

Exports of raw cotton from ports in the Los Angeles region have been falling since August, government data show, though it is unclear how much of the drop is due to congestion and how much to lower demand.

The export scramble comes as the 2014/15 harvest ramps up and puts more strain on a U.S. industry already struggling with languishing prices and weakening demand.

Beijing is curbing its stockpiling, and Turkey has threatened to slap antidumping duties on U.S. imports.

Merchants are looking for alternative routes in a last-ditch effort to get cotton to China in time, potentially inflating costs.

"It could cost U.S. sales," said William May, president of the American Cotton Shippers Association.

Port Metro Vancouver, Canada's busiest port and almost 2,500 miles from Memphis, Tennessee, the center of U.S. cotton trading, has seen an increase in container traffic, in part due to the U.S. West Coast congestion, spokesman John Parker-Jervis said.