Specter of US West Coast labor unrest looms over TPM22

Peter Tirschwell | Mar 03, 2022 10:27AM EST

Loaded import containers at Los Angeles-Long Beach were down 21.4 percent in December versus December 2020. Photo credit: Shutterstock.com.

Concern was palpable this week at the TPM22 Conference about potential port disruption in the coming months tied to negotiations over a new West Coast port labor contract, with sources telling JOC.com it’s possible the talks — and by extension, uncertainty for supply chains — will stretch months beyond the July 1 expiration of the current deal.

The lack of reassuring signals from the International Longshore and Warehouse Union (ILWU) and its management counterpart, the Pacific Maritime Association, against a backdrop of still-heavy port congestion, as well as highly contentious issues such as terminal handling automation, is leading importers to shift cargo away from the West Coast.

“Our customers have to move real product and they have to build forward in their contingency plans, and we can already see quite a strong switch to the East Coast and unfortunately, inevitably, the East Coast is starting to jam up quite fast now,” Jeremy Nixon, CEO of container carrier Ocean Network Express, told TPM22.

That switch was seen clearly in December import data; loaded imports from Asia through Los Angeles–Long Beach tumbled 21.4 percent year over year, while imports through the entire US West Coast fell 19.7 percent, according to data from PIERS, a sister product of JOC.com within IHS Markit. Meanwhile, volumes through the East and Gulf coasts rose 11.2 percent and 28.2 percent, leaving total US imports from Asia down 7.5 percent for the month.

The National Retail Federation (NRF) has cited a recent member survey in which “many respondents indicated a strong concern about the upcoming [labor] negotiations; even the perceived risk of a disruption will force retailers and other shippers to reevaluate their use of US West Coast ports.”

The concern over the potential for disruption, which has been experienced to one degree or another during every West Coast longshore labor negotiation going back to the 1990s, led retailers in February to urge labor and management to get a deal done early. The NRF on Feb. 24 wrote to labor and management urging the parties “to begin your contract negotiations as soon as possible, in the hopes of achieving a new contract” before the expiration.

“We need to make sure the contract negotiations don’t result in additional congestion issues,” said NRF CEO Matthew Shay. The negotiations “will come at a critical time for the retail industry as the peak shipping season for the important holiday season begins this summer.”

But sources at TPM22 with knowledge of the negotiating scenario downplayed the likelihood of an early deal, saying negotiations could possibly stretch into the third quarter of the year.

That would be cause for concern, Nixon said.

“We know that in those years when we have the negotiations, both sides sit down and try to get a deal early, but that rarely happens,” he said. “And so, the concern obviously for all of us in the supply chain is that those negotiations will take a long time and they could revert into lower productivity, and they could even revert into something more serious.”

Several factors at play

After having agreed to allow automation at West Coast ports in 2008, the ILWU has become steadily more opposed to automation and is widely expected to demand that employers’ right to automate be rolled back in some way, perhaps with the union having veto rights over new automation projects. Having paid dockworkers an estimated $800 million in compensation since 2008 in return for the right to automate, and with at least three automation projects under way or planned — at facilities such as TTI in Long Beach and APM Terminals and Pier 300 in Los Angeles, employers are expected to strongly resist any attempted rollback of their automation rights.

There are also several local issues that could become flash points triggering disruption on the docks. It was local rules and jurisdictional issues, not coast-wide issues, that triggered six months of disruption on the docks in 2014 and early 2015, the most extensive disruption tied to a West Coast labor negotiation since the 1990s. For example, dockworkers at a terminal in Seattle are eyeing mechanics jobs currently held by another union. In Oakland, there are festering disagreements over allowing part-time dockworkers, known as casuals, to operate certain equipment, and whether an additional “swing” position funded by employers that moves around in different jobs is really a necessary cost.

On the other hand, some observers believe that even if the negotiations extend beyond the July 1 expiration of the current contract, disruption is not a foregone conclusion. With the Biden administration a strong ally of unions and not wanting to see prolonged port disruption because of its impact on inflation, the ILWU may choose to hold fire. Similarly, with ocean carriers generating all-time record profits, they have a deep reservoir of cash to fund additional dockworker wages and benefits such as long-term care insurance or job security for successive generations of dockworkers.

That is why despite the concern, executives are hopeful that disaster can be avoided. “I would really hope that we can still work with the labor at the terminals to try to avert some major crisis,” Nixon said.