15/06/2022

Dockers’ dispute could impact 35 North American ports and supply chain

06/15/2022 | 5 min

Transporeon is closely watching developments as contract affecting 35 Pacific ports is set to expire at the end of this month

Latest News (as of 01.08)

Both Labor and Management announced settlement of all matters pertaining to health coverage and benefits.  This is an unusual event and indicates that both sides are committed both to cooperating and to forging a contractual agreement.  Although no timeline has been publicized for completion, regular meetings are continuing.  No work slowdowns have been observed at any of the subject ports and absenteeism is at normal, manageable levels.

East Coast and Gulf Coast USA import cargo volumes are increasing due to diversions, improving the West Coast congestion situation but worsening it as more vessels transit the Panama Canal.  With little additional teu capacity potential, major USA retailers are anticipating an August-September surge which could adversely affect West Coast port efficiency.  Intermodal rail and trucking still cannot furnish capacities to alleviate inland transit delays. Lastly, an overall empty container shortage and selective Covid shutdowns in China continue to disrupt export flows.

Latest News (as of 12.07)

East Coast and Gulf Coast USA import cargo volumes are increasing due to diversions, improving the West Coast congestion situation but worsening it as more vessels transit the Panama Canal. With little additional teu capacity potential, major USA retailers are anticipating an August-September surge which could adversely affect West Coast port efficiency. Intermodal rail and trucking still cannot furnish capacities to alleviate inland transit delays. Lastly, an overall empty container shortage and selective Covid shutdowns in China continue to disrupt export flows.

Latest News (as of July 5)

President Biden met with representatives of the ILWU and PMA Thursday June 16. He secured agreement that work slowdowns and a strike will not take place in the event that a new contract is not finalized by June 30. On July 4, labor and management issued the following statement: “While there will be no contract extension, cargo will keep moving, and normal operations will continue at the ports until an agreement can be reached between the Pacific Maritime Association and the International Longshore & Warehouse Union, both sides understand the strategic importance of the ports to the local, regional and US economies, and are mindful of the need to finalize a new coastwide contract as soon as possible to ensure continuing confidence in the West Coast.”

Potential Outcomes

Scenarios to consider:

  • Status quo continues, no disruption other than Covid-caused absenteeism, contract is eventually signed
  • Federal mediation participates, contract is eventually signed
  • Worst case: impasse with ILWU initiating work slowdowns; President Biden invokes Taft-Hartley power to force return to work per prior contract obligations

Steamship lines are closely monitoring the situation and continue to make vessel deployment contingency plans. Congestion is decreasing but with the return of normal business operations in Shanghai and elsewhere in China, a later-July/August import surge is anticipated.

Latest News (as of June 28)

After the June 16 meeting between President Biden and representatives from the ILWU and PMA securing commitment that no work slowdowns or strikes will occur, both sides are engaged in daily meetings but with no public announcements. Federal mediation has not yet been requested but could be if a draft contract is not completed by June 30.

Potential Outcomes

New scenarios to consider:

  • Status quo continues, no disruption other than Covid-caused absenteeism
  • Intractable issues cause the ILWU to alter its no slowdown/no strike commitment.
  • Both sides are able to complete an agreement on/prior to June 30

Steamship lines are closely monitoring the situation and continue to make vessel deployment contingency plans. Congestion is decreasing but with the return of normal business operations in Shanghai and elsewhere in China, a later-July/August import surge is anticipated. Rail, chassis, and local/long-haul trucking capacities remain tight to/from Los Angeles and Long beach.

Update (as of June 20)

President Biden met with representatives of the ILWU and PMA Thursday June 16. He secured agreement that work slowdowns and a strike will not take place in the event that a new contract is not finalized by June 30. Both sides concurred that irreparable damage would be done to the national economy. Both sides also accepted the offer of Federal mediation. This team will be named later this current week.

Update (as of 17.06)

A labor dispute is looming at 29 ports on the West Coast of America and six in Canada, with the contract for the International Longshoremen and Warehousemen Union, ILWU set to expire at the end of this month.

Between them, the ports handle more than 55% of import and 35% of export volume for the two countries, and any stoppages would have effects which could spread rapidly to the entire North American supply chain system.

Negotiations between the ILWU and the Pacific Maritime Association (PMA), the non-profit organization which represents employers on the Pacific ports, are to begin this week.

The ILWU has approximately 20,000 members, and the PMA has roughly 70 members from steamship organizations, terminal operators, and port authorities.

A work stoppage or slowdown of any length would have a seriously harmful impact which would be felt particularly at the dual ports of Los Angeles and Long Beach, hitting both port and transloading efficiencies.

The key issues in the negotiations

The union’s initial demands have already been presented to the PMA, and each side is now determining its negotiating leverage.

The union’s key concern is around automation, and the potential impact it could have on the size of the workforce across the ports.  The ILWU also had demands relating to base salaries, overtime pay, job security and health and pension benefits.

The PMA is focused on port-handling efficiencies with a goal of reducing operating costs at the ports.

The two sides aim to negotiate a ‘master contract’ which will be applicable to all ports (but which will offer flexibility for some local matters to be decided separately. 

Potential outcomes from the negotiations

Two meetings took place between June 14-18, one included a formal agenda and the other an informal information exchange. Neither side revealed any details but a joint announcement confirmed that the parties are speaking definitively and intend to meet formally in this present week. There are no reported changes in sailing schedules, port rotations, and port labor efficiencies at any of the 29 subject harbors.

There are three potential outcomes from the negotiations:

  • The ILWU can legally begin a work-to-rule procedure using selective slow-downs as a means of pressuring the PMA to settle. 
  • If an impasse develops and both sides agree, the Federal Government can initiate mediation
  • Should both sides fail to agree to a new contract by June 30, the President can invoke a national emergency order to force work and negotiations to continue

Knock-on effects

Steamship lines are now closely monitoring the situation and are making contingency plans to redeploy vessels in the event of a work-to-rule procedure or a slowdown.

If a work slowdown is introduced, it will increase both the congestion at the ports, and at-berth time. This will negatively impact efficiency at the piers and also at intermodal terminals. 

The Retail (import) and Agricultural (export) sectors would be immediately affected but the effects would spread quickly to the entire North American supply chain ecosystem.

Transporeon understands the gravity of this emerging situation and is closely watching developments. Join with us as we provide updates and reach out should you have specific questions. We’re in this together.

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