There’s a lot on the line for international trade players on the US West Coast.

After more than two years of major supply chain bottlenecks and desperate workarounds, the global freight industry has been fighting what seems to be an uphill battle.

One challenge after the next – from lockdowns, labor shortage, port congestion and delayed shipments, to fluctuating freight rates – have left shippers and cargo carriers reeling, desperate to adjust to a new normal.

Major West Coast ports, namely Los Angeles and Long Beach, hit max carrier capacity with record counts of idle ships over the past year, a ripple effect of strict COVID lockdowns in China.

Amid the chaos, The International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) employer group have been trying to settle on port worker’s contracts since early May.

The current ILWU-PMA contract between 22,000 port workers and employers expires on July 1. West coast shippers have been waiting in nervous anticipation as labor talks resume on June 1st, after a sudden suspension by ILWU.

What’s being discussed right now and why

ILWU-PMA contract terms are renegotiated every five years, covering topics like worker safety, wages, benefits, and operational processes. It’s not uncommon for labor talks to last for several months, delayed by stalling and strikes.

Cargo pile-ups and port congestion will only get worse the longer contract negotiations run on. This has caused serious frustration and major consequences – including unprecedented delays and inflation – for US importers and commerce.

Terminal automation, introduced in the 2008 ILWU-PMA agreement, has resurfaced as a hot topic during this round of renegotiations. PMA is pushing for more cargo handling automation, reasoning that it’s the most sustainable solution to increase port efficiency and throughput in the long-term.

ILWU have pushed back on this, claiming wide-spread automation of port operations threatens dock worker job security – and poses greater security risks of being hacked.

It’s certainly a growing concern for both sides, with PMA pointing out in a recent study that West Coast ports are increasingly unable to expand their surface areas due to their urban proximity.

Why the current ILWU-PMA renegotiation is critical

The current labor talks are happening at a crucial time because several major events are expected to overlap at once.

West Coast ports collectively handle 58.1% of goods from East Asia, and Christmas merchandise will soon arrive at US West Coast ports. This coincides with a predicted surge in consumer imports as China lifts its lockdowns on June 1st.

If these labor talks are stalled or halted any further, this would have numerous detrimental effects on already-strained global trade.

Port labor impasse

If ILWU and PMA are unable to reach an agreement, a full shutdown of West Coast ports the consequences would be catastrophic for the US supply chain.

On one hand, contract renewals haven’t resulted in a full strike since 1971. On the other hand, negotiation periods have consistently caused partial shutdowns or slowdowns since the 1990s.

Lingering port congestion

Cargo carriers are no stranger to congestion these days. Worldwide port capacity is overflowing, with one in five carrier ships still waiting outside congested ports as of early May 2022.

But if the labor talks go south, this would further delay port operations and cargo handling, triggering a cascade of additional challenges that would move far beyond the West Coast. And as seen in recent months, diverting cargo to other ports only exacerbates the issue.

Skyrocketing freight rates and consumer prices

Freight shipping along the US-Asia route is already 2.5x more expensive than it was last year. And spot rates have been fluctuating over the past months, but it’s on an upward trend.

If ILWU-PMA talks drag on, shippers and consumers alike would be affected by rising costs. The NY Times recently pointed out, “A labor impasse could worsen the floating traffic jams that have kept dozens of ships waiting in the Pacific...that could aggravate shortages and send already high prices for consumer goods soaring.”

Get the latest freight updates

Without a doubt, it’s a critical time for all players in the Trans-Pacific trade route. This contract renewal comes at a time of unprecedented global freight congestion, but some stakeholders are still cautiously optimistic that things will get back on track sooner than later.

Want to follow the ILWU-PMA situation as it unfolds? Subscribe to The Merchant for weekly 1-minute updates and analysis on the latest events in global freight and trade.

Sources:

https://www.joc.com/port-news/longshoreman-labor/west-coast-longshore-contract-talks-suspended-until-june-1-source_20220523.html

https://www.joc.com/port-news/us-ports/port-automation-debate-flares-ahead-uswc-labor-talks_20220509.html

https://www.joc.com/port-news/longshoreman-labor/automation-key-growth-west-coast-ports-pma-sponsored-study_20220502.html

https://www.reuters.com/business/retail-consumer/us-importers-turn-prayer-president-ahead-west-coast-port-labor-talks-2022-05-10/

https://amp.cnn.com/cnn/2022/05/06/business/china-lockdowns-global-port-chaos-supply-chains-intl-hnk/index.html

https://www.joc.com/port-news/us-ports/se-ports-anticipate-import-surge-anchored-vessels-summer_20220411.html

https://fortune.com/2022/04/23/china-lockdowns-inflation-supply-chain-nightmare-shanghai/

https://www.nytimes.com/2022/03/28/business/dockworkers-strike-supply-chain.html

https://www.joc.com/port-news/longshoreman-labor/stakeholders-growing-confident-ilwu-contract-talks-won%E2%80%99t-disrupt-port-operations_20220421.html