US West Coast ports see longest labour disruptions since 2015

Los Angeles – The biggest shipping gateways on the United States West Coast are enduring the longest labour-related disruptions since 2015 as talks between port employers and dockworkers close in on one year without a contract.

The two sides are clashing over how to divide carriers’ pandemic-era profits in a market that has returned to rock-bottom freight rates.

The previous labour contract covering 29 ports from California to Washington State expired on July 1, 2022.

The International Longshore and Warehouse Union (ILWU), representing 22,000 dockworkers, and the Pacific Maritime Association (PMA), which represents ocean carriers and terminal operators, have been negotiating since May 2022.

Until now, the PMA and ILWU have been quiet as they negotiate and port operations have been running relatively smoothly, with the exception of a few regional flare-ups during slow cargo periods that were brief and contained.

But labour shortages and other disruptions that shut or slowed terminals in Seattle, Los Angeles (LA) and Oakland last Friday have continued intermittently into this week.

The stalemate was already starting to disrupt cargo flows.

Late Tuesday, officials who monitor marine traffic around the twin ports of LA and Long Beach said that the movements of six container vessels slated for Tuesday and Wednesday were cancelled or delayed.

In May, a tentative deal looked close, as the two sides reached an agreement on automation, building on an earlier deal on health benefits.

At issue now is a demand by the ILWU for a wage increase of US$7.50 (S$10) per hour, for each year of the proposed contract, the Journal of Commerce reported on Tuesday.

That would amount to a nearly 100 per cent raise in dockworker wages over the course of the proposed six-year agreement.

“The longshoremen want the type of increases that fully reflect the profitability that the carriers had earned during Covid-19 as if that profitability was continuing – and it’s not,” said Mr Peter Tirschwell, vice-president for global intelligence and analytics at S&P Global Market Intelligence.

Carriers are also bristling over a ILWU request that pay increases be made retroactive to July 1, 2022, because of the union’s refusal to negotiate for several months in 2022 due to an impasse over automation, he added.

“If they had signed a deal last year, carriers with all their profits likely would have agreed,” said Ms Stephanie Loomis of Rhenus Logistics. “But now the tides have shifted and rates have collapsed.”

The PMA blamed the terminal issues on “concerted and disruptive work actions” by the ILWU, which denied that talks have broken down.

White House watching

Unlike its intervention in December 2022 to prevent a potential rail strike and in previous disputes at West Coast ports, the White House has maintained it would rather see the two sides work through the collective bargaining process and come to an agreement on their own.

The Biden administration is regularly engaging with the ILWU and PMA and “encouraging them to stay at the negotiating table and finish their work”, White House Press Secretary Karine Jean-Pierre told reporters on Wednesday.

One bright spot is that shipping bottlenecks that helped fuel inflation in recent years appear to have cleared up, with one measure of global supply-chain stresses plummeting to a record low in May.

Even so, the Biden administration is facing repeated calls from retailers worried about extra costs and delays, especially as issues such as a Panama drought compound risks to maritime trade routes.

Other routes

Many cargo owners have been diverting Asia-originated shipments to East and Gulf coast ports, via the Panama Canal, in recent months to mitigate risk of labour disruption.

The Retail Industry Leaders Association, whose members include Home Depot, Target and Best Buy, said some businesses will keep some or all of their cargo away from West Coast ports until a contract has been ratified.

Now, facing capacity constraints and rising fees at the Panama Canal due to a severe drought, cargo owners may be left with more expensive and time-consuming alternatives: routing goods from Asia through the Suez Canal instead of Panama, or risking delays at LA-Long Beach and paying for extra rail rates. BLOOMBERG