West Coast ports experience ongoing disruption as work talks drag on Ship’s crew

(Bloomberg) –

The largest shipping gates on the US west coast are suffering the longest work-related disruptions since 2015 as negotiations between dock employers and dockers approach a year without a contract.

The two sides are at odds over how to split carriers’ pandemic-era profits in a market where freight rates are falling back to record lows.

The previous employment contract for 29 ports from California to the state of Washington expired on July 1, 2022. The International Longshoremen and Warehouse Union, which represents 22,000 dockers, and the Pacific Maritime Association, which represents shipping companies and terminal operators, have been negotiating since May 2022.

So far, the PMA and ILWU have been quiet during negotiations and port operations have been relatively smooth, with the exception of a few regional flare-ups during slow-load periods, which have been brief and subdued.

But labor shortages and other disruptions that led to closures or slowdowns at terminals in Seattle, Los Angeles and Oakland last Friday intermittently persisted into this week, the PMA said in a statement Monday.

“We’ve seen a lot of progress over the past 48 hours,” Port of Long Beach executive director Mario Cordero said in an interview on Bloomberg Television on Tuesday. “Obviously there is an issue that has caused some pause in the discussions.”

The standoff was already beginning to disrupt the flow of cargo. Late Tuesday, officials monitoring maritime traffic around twin ports of LA and Long Beach said movements of six container ships scheduled for Tuesday and Wednesday have been canceled or delayed.

Cordero said the Long Beach terminals were open Tuesday and the issue is “an obstacle in the way” before both sides finally reach a resolution.

Just last month, a tentative deal seemed close when the two sides reached an agreement on automation that built on an earlier agreement on health benefits.

It is now about the ILWU’s demand for a $7.50 hourly wage increase for each year of the proposed contract’s term, the Journal of Commerce reported on Tuesday. That would equate to an almost 100% increase in dockers’ wages over the course of the proposed six-year agreement.

“Dockers want increases that fully reflect the profitability that shippers have achieved during the COVID-19 crisis, as if that profitability is sustained – and it is not,” said Peter Tirschwell, vice president of global intelligence and analytics at S&P Global Market Intelligence. “That’s where the conflict arises.”

Haulers are also balking at the ILWU’s request to make wage increases retroactive to July 1, 2022, after the union refused to negotiate for several months last year over an automation impasse, Tirschwell said.

“If they had signed a deal last year, the hauliers with all their profits would probably have agreed,” said Stephanie Loomis from Rhenus Logistics. “But now the tide has turned and interest rates have collapsed.”

The PMA blamed the crucial issues on “concerted and disruptive labor actions” by the ILWU, which denied the talks broke down. Both sides declined to comment on the details of the negotiations.

The White House is watching

Unlike its interventions in previous standoffs at West Coast ports or in December 2022 to prevent a possible rail strike, the White House has not signaled its willingness to engage in the current negotiations. The Biden administration remains monitoring the situation but has said it strongly prefers that the two sides negotiate a deal without government involvement, according to White House officials.

One bright spot is that the supply shortages that have helped fuel inflation in recent years appear to have eased, with a measure of tensions in the global supply chain falling to a record low over the past month.

Still, the Biden administration faces repeated calls from retailers concerned about additional costs and delays, especially as issues like Panama’s drought increase risks to maritime trade routes.

Other routes

Many cargo owners have been rerouting shipments originating from Asia via the Panama Canal to ports on the East and Gulf Coasts in recent months to reduce the risk of work stoppages.

The Retail Industry Leaders Association, which includes Home Depot Inc., Target Corp. and Best Buy Co., said some companies will keep some or all cargo off West Coast ports until a treaty is ratified.

With capacity constraints and increasing fees on the Panama Canal due to a severe drought, cargo owners may now have more expensive and time-consuming alternatives: moving goods from Asia through the Suez Canal instead of Panama, or risking delays in Los Angeles. Long Beach and payment of additional rail fares.

“All of this is expensive,” said Loomis from Rhenus Logistics. “Now that there are walkouts on the West Coast, this election is becoming less and less pleasant.”

–With support from Jordan Fabian.

© 2023 Bloomberg LP

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