The Los Angeles and Long Beach seaports link businesses across the country with markets and manufacturers across the world. The ports claim over 200,000 port-related jobs, and their collective trade volume value exceeds $400 billion.
In late 2024, the ports set cargo records month after month. Their success is due to the skill and strength of truck, rail and ILWU (International Longshore and Warehouse Union) labor, the business acumen of terminal managers, advanced cargo technology and the countless agencies, small businesses and others that make this hard-working waterfront succeed.
The complexity that allows a port to operate can be astonishing to people on the outside, and sometimes even to port workers themselves. Complexity is powerful when managed for success, but it also brings risk.
If each element is necessary, then the loss of any can disrupt the system. And if multiple disruptions occur, the consequences may be surprising, including being greater than the sum of the parts.
An early example of “complex disruptions” to maritime supply chains occurred on March 23, 2021, when the containership Ever Given grounded in the Suez Canal, blocking the waterway for eight days as the pandemic already had scrambled supply chains around the world. High cargo volumes were already starting to stack up in LA/Long Beach, with more to come.
Fortunately for world markets, especially in Europe, the vessel refloated before many ships needed to divert and supply chains returned to an (almost) normal level.
Since then, global maritime trade has endured disruptions that make the Ever Given incident look relatively modest in comparison.
Extraordinary cargo volumes at the end of 2021. Severe drought impacts on the Panama Canal and the Mississippi River. The Russian invasion of Ukraine. Houthi attacks on the Red Sea. And most recently, trade volume distortions attributed to threats of strikes, tariffs and other factors.
Researching Disruptions
With the support of the Department of Homeland Security, three DHS university “centers of excellence” (CCICADA based at Rutgers University, CREATE based at the University of Southern California and CAOE at Arizona State University) have been researching “complex disruptions,” which we define as a series of distinct disruptions to maritime trade that occur within a given time and geographic region such that recovery from any of the disruptions is not complete before the next arrives.
We believe this will improve risk assessments and help identify resilience strategies—which may reduce the financial impact of these events by significant amounts, up to 70% in at least one of our studies.
Also, because we include economic impacts beyond port environments, this can promote a better appreciation for the importance of safe, reliable maritime transportation to the many businesses and individuals that depend on maritime supply chains.
Our methodology is to learn about regional maritime trade areas, devise plausible scenarios involving multiple disruptions, work with local experts to refine that understanding and predict the operational and economic consequences of these scenarios.
What would a complex disruption to the San Pedro Basin surrounding the twin ports look like?
There are many possibilities, but, for our research, we began with a labor/management dispute that, while not especially severe, strains the system, reducing its ability to absorb larger disruptions.
Because strikes and similar events have occurred in recent times, we have the advantage of an established body of work that quantifies their economic impact, providing us a foundation for projecting the impact of the additional combined disruptions.
We then introduce a series of wildfires that result in power outages to the port, interrupting cargo operations. Finally, while the impact of power outages remains, we imagine an apparent terrorist attack with immediate and persistent impacts to the entire port region.
Before we continue, we point out that our choice of these disruptions is not to imply that they are inevitable or that businesses and agencies are unprepared for them.
On the contrary, we are impressed by the level of professionalism, preparedness and dedication that our many industry and government experts conveyed as they generously shared their perspectives with us.
And we do not mean to reduce the impact of challenging and indeed horrific scenarios into dollars and cents entirely. Our hope is that we can help identify risk-reduction strategies for stakeholders within the port community and highlight the value of a strong and resilient marine transportation system to others outside of that community.
With that understanding, the details of our hypothetical scenarios are as follows. While these scenarios are to a large extent hypothetical, they reflect realistic concerns on behalf of many port stakeholders we have consulted, who also helped us refine them.
Background Condition:
The contracts of 22,000 dockworkers at 29 West Coast ports expire without agreement on July 1. Conflicts regarding new contract negotiations cause a labor/management dispute between the ILWU and terminal operators. This conflict occurs right before peak shipping season of August to October.
On July 2, 800 dockworkers go on strike. The strike lasts for five days (July 2-7) as dockworkers and terminals negotiate issues including wages and automation.
In our scenario, the strike lasts for five days, but of course, the duration is unknown at the start. Shipping lines begin diverting cargo to Oakland, Seattle and Tacoma. However, their capacity is far less than LA and Long Beach in the best of times, and they’re also experiencing a busy period, with limited additional capacity.
Gulf Coast ports are the next available option and some cargo is diverted to Houston. These diversions increase congestion and lead times, resulting in ocean shipping spot rates as high as $8,768/40-foot container (which is $5,439 higher than the five-year average of $3,329).
In the ports of L.A./Long Beach, there are 38 container ships at anchor and crowding and congestion on the waterfront.
Container wait times after the strike are as high as 26.5 days. The strike aggravates shortages and increases consumer pricing, which is estimated to cost the economy $1.76 billion (This value and the spot rate we cite in this paragraph come from studies in the literature),
Initial Disruption:
Wildfires have increased in frequency and severity around the world as the number of days with favorable fire conditions (high winds and low relative humidity) doubles in comparison to conditions in the last four decades.
In California, fires damage transmission lines and substations servicing the L.A./Long Beach ports area on July 12, causing power failures and reducing the effectiveness of automated systems.
Ship-to-shore cranes are repeatedly idled while sensitive electronics, including some components of Terminal Operating Systems, take hours to reset, even after a momentary power loss.
The brownouts and power outages persist for three days. Power is restored on a gradual basis, with all port facilities on full power by July 16. We note that wildfires sufficient to interrupt power to the ports would impact many homes, businesses and institutions, and draw public and private resources and personnel.
Air quality and heat could make outdoor work hazardous, perhaps requiring more frequent breaks and other mitigations.
Secondary Disruption:
On the morning of July 18, while the ports are still struggling to work through the backlog caused by the strike and power outages, an explosion occurs inside a container as it is being transferred from ship to shore at a terminal.
The incident results in three deaths, six injuries and severe damage to the gantry crane and surrounding infrastructure. The terminal shuts down immediately.
Nearby terminals slow or stop operations in what they hope is an abundance of caution, and to protect their workers until the cause of the incident is known. Local police and fire departments, emergency personnel, forensic teams, U.S. Coast Guard and FBI officials respond to the explosion, render immediate assistance and begin their investigations.
Authorities quickly determine that the explosion was not an accident. Rather, an unknown terrorist organization used a shipping container to smuggle and detonate a bomb, apparently targeting the port itself.
The Coast Guard sets MARSEC (Maritime Security) Level 2 for the ports of L.A. and Long Beach. This triggers additional security checks (screening) for cargo, personnel and trucks, which require additional personnel and leads to further backlogs.
With capacity in L.A. already down by 15% due to the targeted terminal being down for repairs, other terminals struggle to meet the additional MARSEC screening requirements while absorbing the additional cargo load along with the disruption from numerous law enforcement and emergency response agencies.
At the targeted terminal, workers support the forensic teams for three days (July 19-22) while removing some of the debris. The damaged gantry crane will make one berth unavailable for months and limit the movement of other cranes. It will take two years to replace.
The attack is followed by a credible threat that other similarly sabotaged containers may be on their way into U.S. ports or perhaps have already been offloaded and are awaiting transfer. Port and affiliated workers refuse to work until the government assures some degree of safety. The Coast Guard sets MARSEC Level 2 for the entire West Coast.
Terminals scramble to find, hire, train and deploy extra security guards. Even where additional security personnel are present, the extra screening requirements slow the movement of cargo on and off terminals, leading to backups from the anchorages to the highways and rail lines.
The additional screening requirements increase overall shipment costs and cause significant container wait times and berth delays. Coast Guard, Customs and other agencies confer on how to manage the crisis and develop effective container screening procedures.
No further attacks occur and after one week, the security situation is such that the Coast Guard sets MARSEC Level 1 for all West Coast ports and terminals.
Disentangling Factors
Pacific Maritime readers can well imagine the operational impact of the above scenarios. Ships would be waiting at anchorage, trucks would be backed up at the gate, importers would be demanding prompt deliveries.
Everyone in and around the ports would be putting in overtime to get cargo moving. Our trio of disruptions would certainly result in long delays and high costs.
Gaining a more complete picture of the net economic costs to the port community and beyond is a challenge. Some costs are absolute, such as spoiled cargo from reefer containers held too long. In other cases, one person’s loss is another’s gain, i.e. overtime payments or rerouting cargo.
Still others are complex: a cargo backlog may mean steady work for a port terminal, but the delays could have large and unmitigated economic impacts to upland businesses far from the pier. What is the impact of resilience activities, such as use of stockpiled inventories? And what if the actual delays are shorter, or longer, than our assumptions?
Disentangling these factors requires a rigorous analysis. Part of our study builds on the Economic Consequence Analysis Tool E-CAT and its extensions, whose development was led by one member of our research team, Adam Rose.
As part of our study, we’ve been expanding E-CAT to develop a user-friendly decision support tool called MCAT for dealing with the kinds of complex disruptions we have described. MCAT uses a “computable general equilibrium” model to estimate the total economic impacts of individual and compound disruptions to the marine transportation system.
For our particular example, we have used MCAT to examine the economic impacts of our scenarios to the L.A. area, to San Francisco, the rest of California, and the United States as a whole.
Computable general equilibrium (CGE) models are a class of economic models that characterize the economy as a set of interrelated supply chains and use actual economic data to estimate how an economy might react to economic shocks or policy changes.
A full explanation of the CGE modeling technique is beyond the scope of this article but will be published in an economics journal soon.
Our results suggest that the net impact to the L.A. Metro area is a reduction in GDP of about $4.1 billion. That estimate assumes that businesses employ a variety of pre-disruption mitigation tactics and post-disruption resilience tactics to reduce what would otherwise be much larger impacts. Also, there is an overall reduction in GDP to the entire U.S. of about $300 million.
This is less than the reduction in L.A. Metro because San Francisco Metro and other parts of the U.S. actually attain an increase in GDP by accommodating rerouted ships and making up a good deal of the slack in lost production in L.A. Metro.
Of course, these numbers are just initial estimates, but they show the general direction of impacts. Our actual analysis goes into much more detail, investigating how these numbers might change under some shifts in the scenarios and in the basic assumptions.
These are results from an analysis of the complex disruption consisting of all three components of our example. We also compared the results of individual disruptions and concluded that the MARSEC incident would have the largest effect on the L.A. Metro economy of all three, while the strike would have the largest effect on the overall U.S. economy.
Our analysis estimates that dockworker avoidance behavior associated with a raising of the MARSEC level leads to L.A. Metro impacts 13% higher than they would have been without it.
The resilience tactics applied to reducing business interruption we studied include rerouting cargo, expanding port capacity with overtime and extended gate hours, and good management practices, such as drills, cross training and contingency planning. Importers have similar options, such as maintaining a larger inventory, identifying alternative supply sources and business continuity planning.
Our results showed that just these few resilience tactics can reduce losses for L.A. Metro by 72% and that production recapture, inventories and ship-rerouting have the strongest effects.
The diverse collection of businesses, labor and agencies that make ports so successful have endured many disruptions in the past and will doubtless continue to do so. Still, when we ask port stakeholders “what keeps you up at night?,” we often get answers such as those included in this research.
Worst case scenarios may well occur, and they will likely occur in the context of other disruptions. Smart business planning and risk assessments should reflect that reality.
Please contact us if you have thoughts on improving maritime supply chain resilience to complex disruptions or questions on our research. We welcome your expertise!
Acknowledgements: This article is based upon research supported by funding from the Center for Accelerating Operational Efficiency (CAOE) under grant no.17STQAC000001 from the U.S. Department of Homeland Security (DHS). However, the views and conclusions contained in this document are those of the authors and should not be interpreted as necessarily representing the official policies, either expressed or implied, of DHS. The authors are indebted to Casey Hehr and Drew Schneider for assistance in formulating and beginning to analyze the complex scenario, and to Geraldine Knatz, Kip Louttit, Jeffrey Milstein and Terry Clower for providing assistance with estimating the impact of various resilience strategies. The authors also thank Christopher Di Paolo, Dennis Egan, Ryan Whytlaw and Konstantinos Papaefthymiou for their research assistance.