Will West Coast port labor negotiations devolve into a significant, prolonged disruption to U.S. supply chains, akin to the labor fallout in 2014-2015? If there was a solution to place a “prop” bet on this, how have the percentages modified because the last port labor contract expired on July 1, 2022?
The longer the talks drag on, the upper the possibility of a worst-case scenario. Talks on the brand new contract began in May 2022. The one-year anniversary has now come and gone.
There have been glimmers of hope along the way in which, at times nudging the betting line toward a less dramatic climax. The International Longshore and Warehouse Union (ILWU) said on April 20 that agreements were reached “on certain key issues,” reportedly including automation.
Yet some handicappers would have noticed the timing. That announcement got here the very day the Biden administration’s pick to guide the Department of Labor, Julie Su, had her Senate nomination hearing. The progress announcement allowed her to inform lawmakers she had obtained positive results after engaging the parties.
Oddsmakers who placed little weight on the April 20 announcement seem like they’re right. The betting line just shifted in favor of the large-scale disruption scenario.
West Coast disruptions flare up again
On Friday, the ILWU staged “concerted and disruptive work actions that effectively shut down operations at some marine terminals on the ports of Los Angeles and Long Beach,” said the Pacific Maritime Association (PMA), the group representing the terminals within the labor negotiations.
The ILWU staged “similar work actions which have shut down or severely impacted operations on the ports of Oakland, Tacoma, Seattle and Hueneme,” said the PMA.
In keeping with Jessica Dankert, vice chairman of supply chain on the Retail Industry Leaders Association (RILA), “Retailers are alarmed to learn of the work stoppage underway at several West Coast ports. If this work stoppage drags on and contract negotiations proceed to falter, the Biden-Harris administration must step in and broker a deal.”
Negotiations between the union and employers “deteriorated” over wages, with staff not showing up at some terminals starting Thursday night and increasing into Friday, reported the Wall Street Journal.
“Any reports that negotiations have broken down are false,” said ILWU President Willie Adams. He highlighted the health risks and lives lost of ILWU members during COVID and the “astronomical revenues” of ocean carriers during that period, and argued that ILWU members deserve “an economic package” that accounts for his or her role within the shipping industry’s windfall — in other words, they need a piece of the pandemic profit pie. Adams specifically pointed to the falling percentage of ILWU wages and advantages as compared to PMA profits.
ILWU Local 13 said, “Ocean carriers and terminal operators have thumbed their noses on the work force’s basic requests, insinuating that the health risks and the lack of lives … throughout the pandemic didn’t matter to them they usually were expendable within the name of profit.”
In reference to union members not showing up for work on Friday, ILWU Local 13 said “the rank-and-file membership of the Southern California ILWU has taken it upon themselves to voice their displeasure with the ocean carriers’ and terminal operator’s position.”
Second major disruption this yr
The most recent work slowdown is the second major incident this yr, although there even have been multiple smaller and more subtle disruptions, in keeping with the PMA and Agriculture Transportation Coalition.
Work previously stopped within the ports of Los Angeles and Long Beach for twenty-four hours between the night shift on March 30 and day shift on March 31. Terminals were shuttered.
As with the late-March slowdown, U.S. exporters were caught in the center in Friday’s incident. Export goods turned away from terminals as a consequence of labor motion must be stored elsewhere until cargoes may be received, with added storage costs cutting into exporter profit margins. Storage costs for refrigerated food cargoes are even higher.
On the import front, U.S. shippers have already shifted supply chains toward East and Gulf Coast ports in preparation for potential disruptions on the West Coast.
However the U.S. supply chain’s exposure to labor unrest stays acute. The highest West Coast ports handled 812,000 twenty-foot equivalent units of containerized import in April, accounting for 48% of the country’s total, in keeping with The McCown Report.
Backup protocols from COVID era still in place
On a positive note, the U.S. supply chain has very recent and in-depth experience coping with vastly greater congestion than occurred when labor disruptions backed up traffic in 2015.
In keeping with data from the Marine Exchange of Southern California, the prior labor contract disruption caused a maximum of 27 ships to attend off Los Angeles/Long Beach amid a backup lasting three months. Within the COVID era, the Los Angeles/Long Beach backup peaked at 109 ships and spanned two years.
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A system is already in place to take care of labor-related backups courtesy of lessons learned throughout the COVID-era backup.
“Vessel traffic remains to be moving per schedules and no schedules have slipped yet, so no backup,” said Kip Louttit, executive director of the Marine Exchange of Southern California, in a report back to media on Friday.
“Thankfully, the brand new queuing system … has remained in effect for the past six months [since the COVID backup ended] despite the fact that it was not needed because there was ample labor. If the present labor actions do lead to a container vessel backup and berthing dates are slipped back, because partners kept the system going, each vessel has a calculated time of arrival [CTA].
“With CTA in hand and published on the Master Queuing List, if a backup develops, ocean carriers are requested to return to backup protocols … as we did throughout the 2021-2022 backup,” said Louttit.
Way forward for Supply Chain
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