Employers who operate West Coast port terminals and the union representing dockworkers on Friday rejected calls to extend their contract which was due to expire at 5:00 p.m. PST, but promised to keep cargo moving uninterrupted until until an agreement is reached.
“Both parties understand the strategic importance of the ports to local, regional and US economies and recognize the need to finalize a new coastwide contract as soon as possible to ensure continued confidence in the West Coast.” as a competitive trade route, the Pacific Maritime Association and the International Longshore and Warehouse Union (ILWU) said in a joint statement Friday afternoon.
The fact that the parties are communicating with one voice rather than issuing separate press releases in an effort to garner public support is seen as a good sign by those familiar with the history of port labor relations . The master agreement covers 22,000 dockworkers at 29 US West Coast ports, representing approximately 44% of US containerized cargo traffic. The main gateway for containers is in the twin ports of Los Angeles and Long Beach, California.
More than 150 business groups earlier today urged the White House to push management and workers at West Coast ports to temporarily extend their contract to assure businesses, workers and consumers of chain continuity of supply as the economy faces growing headwinds.
Talks on a new five-year labor agreement between the ILWU and West Coast employers, which began in mid-May, are taking place amid recovery from supply chain disruptions caused by COVID, record freight volumes and congested container terminals, inland distribution difficulties, product shortages and growing worries about a possible recession.
“Extending the current contract would provide additional certainty for all supply chain players who rely on ports on the West Coast of the United States. This is especially important as we continue to experience supply chain disruptions and congestion for a variety of reasons,” the trade associations said in a letter to President Joe Biden.
The absence of a formal contract opens the door to job action, but neither side is preparing for a strike or lockout.
Leaders of the Pacific Maritime Association (PMA) and ILWU met with President Biden at the White House on June 10 and pledged to reach a working agreement without any disruption to cargo. The comments were seen by many as a positive sign after three of the last four contract negotiations led to disruption, including work slowdowns. The economic impact resulting from the slowdowns during negotiations in 2014-2015 took approximately eight months to overcome.
But fears of shipping delays remain as container volumes rise ahead of the traditional busy season for Asian imports. Many shippers have already re-routed freight to ports on the east and gulf coasts to guard against possible labor-related delays along the west coast. Many of these ports, including the Port of New York/New Jersey, are now experiencing increased congestion and vessel backlogs.
Meanwhile, the schedule reliability of container lines between Asia and US West Coast ports has dropped between 10% and 20%, according to Sea-Intelligence, a maritime data provider. And backlogs could rise as exports from China resume after lockdowns were lifted in Shanghai and other cities last month. Although some retailers say they have too much inventory now, the excess stock appears to be category-specific and many products are still in demand, including for the upcoming back-to-school season.
Port of Los Angeles Director Gene Seroka said on Bloomberg TV that he expects the port to report its best June for container throughput.
The ILWU essentially has monopoly power because West Coast ports must use its members to manage shipping.
“As we enter the all-important peak shipping season, we continue to expect freight flows to remain at record highs, which will add pressure on the supply chain and increase inflation. Many expect these challenges to continue throughout the year.Even with the recent joint statement, supply chain players remain concerned about the potential for disruption, especially without a contract or extension in place. “, indicates the letter.
Signatories include the National Retail Federation, the National Association of Manufacturers and the Toy Association.
On Thursday, nearly two dozen Democratic lawmakers wrote to the PMA and ILWU to stress the importance of working in good faith to finalize a new contract and ensure the ports continue to operate without interruption.
Both sides face strong political pressure to reach a resolution. Even though many of the ILWU members earn more than $100,000 a year, the union portrays the talks as being between traditional American workers and foreign shipping companies making record profits. At the same time, the pro-union Biden administration is struggling to rein in record inflation that is hurting the president’s approval ratings. A slowdown or work stoppage would aggravate existing shipping delays, increasing the prices of many commodities in addition to transportation costs.
A former shipping company executive who took part in previous ILWU negotiations, but did not want to be identified, recently said the promise to the president tipped the balance considerably that there would be no dispute. work stoppage during contract negotiations.
Conflict over automation
The key issue on the table is automation, along with compensation and benefits. Shipping lines and their affiliated terminals see automation as the only way to manage compound annual growth of 3% to 4% when most ports lack the physical space to expand. The union is worried about job losses, but many experts say they will gain long-term jobs as container volumes increase and more jobs are needed to operate and maintain the technology.
Almost all northern European ports have automated truck gates and yards, as do many terminals in Asia. The Los Angeles/Long Beach complex has two semi-automated terminals, with another under development. A PMA-sponsored study from the University of California, Berkeley in early May showed that not only do automated terminals have a 44% productivity advantage over non-automated terminals, but they account for also more working hours for dockers.
A study released Thursday by the Economic Roundtable and funded by an ILWU grant countered that automation at the Long Beach Container Terminal and Los Angeles TraPac Terminal eliminated 572 full-time jobs and 41.8 million dollars in wages per year for longshoremen.
The nonprofit urban research organization has recommended that the cities of Long Beach and Los Angeles adopt a displaced worker impact tax on all new automated equipment to offset public costs resulting from the loss of jobs caused by automation. He also said the state of California should enact a tax on automated terminal equipment equivalent to income and payroll tax revenues when containers are moved by dockworkers without automated equipment. Ports in San Pedro Bay should not approve terminal automation plans unless it can be shown that the automation will produce net benefits for California workers, the report adds.
The shipping industry leader has predicted that the PMA will make a large, one-time lump sum payment to dockworkers to buy the right to automate in perpetuity.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
Lawmakers plead for deal before dockers contract deadline