There’s an increasing abundance of skittishness surrounding the long run of East and Gulf Coast ports.
The labor contract between the International Longshoremen’s Association and the USA Maritime Alliance (USMX) is about to run out at the tip of September. The ILA represents some 70,000 dockworkers, while the USMX represents employers at 36 coastal ports — including three of the U.S.’s five busiest ports: the Port of Latest York and Latest Jersey, the Port of Savannah, Georgia, and the Port of Houston.
Contract negotiations between the ILA and the USMX began in February 2023 but quickly foundered on the difficulty of wage increases. Developments since then haven’t been promising.
‘Talk of potential disruptions has increased’
In November, ILA leadership warned roughly 45,000 of its members to “prepare for the opportunity of a coastwide strike in October 2024,” after the present master contract expires. ILA President Harold Daggett also cautioned that there isn’t any likelihood of extending the present contract past the expiration date.
In other words, ILA dockworkers are fully prepared to swap pallet jacks for picket signs come Oct. 1.
Unsurprisingly, these threats unnerved trade associations just like the National Retail Federation, which have actively voiced their desire to facilitate negotiations between the 2 parties. NRF President and CEO Matthew Shay, in a January letter, expressed concern “that the discussions have been on hold for months and talk of potential disruptions has increased.
“Even the specter of a disruption can have a negative economic impact on the covered ports,” Shay argued, “especially if cargo owners and other supply chain stakeholders consider that operations will likely be slowed or shut down in the course of the all-important peak shipping season this fall.”
Other analysts concur: In a November post on LinkedIn, Vespucci Maritime CEO Lars Jensen wrote, “[T]he mere threat of a strike could cause shippers to pre-emptively move cargo to the West Coast. … The threat is probably going not idle in any respect, but saber-rattling at this point is to be expected.”
In some ways, the ILA is riding on the various successes that labor had in recent times. In August, the Teamsters celebrated the ratification of a brand new agreement with UPS (albeit one with unintended negative effects). After a 46-day strike against Ford, Stellantis and General Motors, the United Auto Staff union secured large pay raises and other advantages for its members last fall.
And, in fact, there have been the protracted negotiations around West Coast ports.
Shifting tides
Near the height of the post-COVID import boom, the labor contract between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) expired on July 1, 2022. What followed was an 11-month period of confusion, uncertainty and chaos for West Coast importers.
Soon after the contract’s expiration, 52 trade associations, industry organizations and businesses — including the NRF and PMA — penned a letter to California Gov. Gavin Newsom, urging him to incentivize growth on the state’s ports. The letter made the case that, despite the overwhelming growth in total volumes, West Coast ports’ market share had declined 19.4% since 2006 relative to their East and Gulf Coast counterparts.
Newsom was not the just one called on to intervene: Greater than 150 business groups implored the Biden administration to pressure the ILWU and PMA for a brief extension of the labor contract, fearing work stoppages and shipment delays.
But while no such extension ever materialized, neither did the stoppages and delays — for a time, that’s.
Even with the ILWU’s forbearance from striking, the West Coast ports’ market share continued to erode as shippers would accept nothing lower than a signed deal. Still, the ports were optimistic that volume would return once the negotiations were resolved.
Others were skeptical. “I believe a variety of the transition from the West Coast to the East Coast is everlasting,” Nerijus Poskus, vice chairman of ocean strategy at Flexport, told FreightWaves in February 2023. “People have gotten used to this recent reality. I don’t think this has much to do with the chance of a strike on the West Coast anymore. I don’t see the West Coast gaining all its share back.”
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The bearish case ultimately proved prescient when the ILWU shut down operations on the ports of Los Angeles and Long Beach for twenty-four hours in April 2023. By the point the stoppage occurred, East and Gulf Coast ports had been outperforming West Coast ports for 23 consecutive months. The next months saw a handful of labor stoppages and slowdowns that further eroded shippers’ confidence within the ports’ operational capabilities.
When the ink dried on the ultimate labor contract — nearly a full yr after the previous one expired — the damage had already been done.
Extenuating circumstances
Because the resolution of its labor uncertainty, the West Coast has managed to claw back some market share, albeit in efforts aided by circumstances beyond its control. Still, the character of its struggle can offer a sign of how things might progress along the East and Gulf coasts.
But while there may be good reason to consider that a possible ILA strike will impact East and Gulf Coast ports in much the identical way because the ILWU affected ones along the West Coast, it also seems as if the ILA is working from a special playbook.
For one, the ILA has already taken a hard-line stance against continuing operations with no contract in place. Ports represented by the USMX are already in a fragile state, with imports threatened by the continued drought on the Panama Canal. Taken together, these circumstances imply that any ILA stoppages could be swift and its effects immediate, unlike the prolonged drama that played out along the West Coast.
This inference is strengthened by the indisputable fact that imports to East and Gulf Coast ports come from a more diverse mixture of origins than the West Coast. Whereas the West Coast primarily gets its cargo from Asia, East and Gulf Coast ports get shipments from Europe and South America in addition to Asia.
The ILA also views itself as having a firmer stance against automation than the ILWU, targeting shipping lines directly. “If foreign-owned firms like Maersk and MSC try to switch our jobs with automation,” ILA President Daggett said in November, “they’re going to get a painful reminder that longshore employees brought these firms to where they’re today.”
Speaking on APM’s Pier 400 terminal on the Port of Los Angeles, Daggett added, “Who the hell is a foreign company like Maersk to come back to America and construct a completely automated terminal just like the one we just saw? Those are jobs lost in America and profits sent back to Copenhagen.”
Maersk, meanwhile, is contending with its own financial challenges after the pandemic-era boom. With ports and shipping lines alike in a bind, the ILA finds itself in a good position to push its demands.
For his or her part, retailers are broadly expected to tug forward their peak season freight in order to avoid potential issues come October. But when negotiations between the ILA and USMX deteriorate further — and particularly if the ILA follows through with its first coastwide strike since 1977 — the pendulum is more likely to swing back in favor of the West Coast.
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