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US west coast shippers need to prepare

Contract negotiations between the ILWU, which represents nearly 14,000 port workers and the Pacific Maritime Association (PMA), on behalf of shipping lines and terminal operators at 29 west coast ports, will begin on the 12th of May, against a backdrop of vessel backlogs, congested marine terminals and shippers directing cargo to US East Coast and Gulf terminals, to avoid potential port chaos.
The pending negotiations come amid fears from shippers that an impasse could result in further disruption, leading some importers to shift traffic to the East and Gulf coasts, in an attempt to avoid any potential problems.

For the past year East Coast ports have been battling congestion and vessel backlogs outside Charleston, Savannah, New York and New Jersey, and Virginia. With record-low schedule reliability and vessel delays of over 10 days, there is no certainty that they will clear before the expected summer surge.

Smaller ports such as Baltimore, Jacksonville, and Wilmington, North Carolina, are free of congestion and there are plans to keep open three Savannah pop-up yards through the end of 2022 to handle long-dwelling imports.

According to reports in the press that we are checking, if volume through the port picks up more than expected other pop-up yards in Chatsworth, Georgia; Huntsville, Alabama; and Rocky Mount, North Carolina, are also available.

There is some cautious optimism for the negotiations, based on the cooperation that was demonstrated by longshore workers and employers, in handling the import surge that is now in its 20th month amid the COVID-19 pandemic.

US Secretary of Labor Marty Walsh cautioned not to judge this year’s talks on how prior negotiations played out. “You can’t look at history of past practices to say, ‘Well, in 2014 it was pretty bad, so that means in 2022 it will be pretty bad. ’That’s not how negotiations work.”

Neither the ILWU nor the PMA has spoken publicly as to what issues they view as crucial in this year’s negotiations. However, the union in recent years has publicly opposed the spread of automation on the West Coast.

Employers, on the other hand, have noted that in order to continue handling record cargo volumes each year on waterfront property that cannot be expanded, some West Coast terminals will have no choice but to automate, as automation allows terminals to almost double the cargo volumes they can handle on the same footprint compared with operating manually.

In past negotiations, discussions involving wages normally were not a major sticking point. According to the PMA’s 2021 annual report, the average salary for full-time general longshore workers was $182,789. Marine clerks’ average salary was $203,533, while the average for foremen was $280,352. Quite incredible by anyone’s imagination.

While we are hopeful that slowdowns are more likely than strikes – and these won’t impact all ports – we would ask that customers shipping to, or importing through, the West Coast speak to us at the earliest opportunity so that we can review their situation and prepare contingency plans to protect them.

Depending on your priorities there are alternative access ports that we can consider diverting to, in Canada, the Gulf and the East coasts. But with so much cargo already diverted from Los Angeles and Long Beach, we would want to audit how much additional capacity these ports actually have.