Port Strike

IMMINENT:

EAST & GULF COAST PORT STRIKE!

Inside Angle on the Market Conditions and the Potential ILA East and Gulf Ports Strike

 Guest Contributor: Anthony D'Ambrosio, Supply Chain Solutions

 

The scramble for imports on the trades out of Asia and the EU is the result of several factors, including Red Sea-related disruption, congestion at key load ports in Asia and the possibility of labor strife this fall along the US East and Gulf coasts. That is what is causing importers on Asia-Europe and Asia-USA to jump sooner than they normally would, with knock-on effects for the West Coast supply chain.

 

The demand momentum could sustain during Q3 as shippers intend to front load their cargoes ahead of Christmas to evade further disruptions, potential tariffs and further increases in freight rates, all of these are in the pipeline to unfold, unfortunately. 

 

• The threat of a major strike at East and Gulf Coast ports is looming more ominously after contract negotiation talks broke down last week. Some 85,000 dockworkers, unionized under the International Longshoremen’s Assn. (ILA), will see their labor contracts expire Oct. 1 with the U.S. Maritime Alliance (USMX).  Echoing last year’s similar situation on the West Coast, a key hang-up to a successful renegotiation has been automation.

 

• The ILA canceled talks after discovering that APM Terminals and Maersk Line are using an auto gate system, which autonomously processes trucks without ILA labor and allegedly violating the coast-wide master contract currently in place. This system, initially identified at the Port of Mobile, Ala., is reportedly being used in other ports as well.

 

• There’s no point trying to negotiate a new agreement with USMX when one of its major companies continues to violate their current agreement with the sole aim of eliminating ILA jobs through automation, according to ILA President Harold J. Daggett, who serves as chief negotiator for the union.

 

• We are hearing that the ILA will not meet with USMX until the issue is resolved. Like what was seen last year and in 2022 on the West Coast but in reverse, fears of a strike could cause shippers to divert their cargo to the West Coast which would shift back a lot of volume.

 

• It’s also possible that volumes through the East and Gulf Coast may increase ahead of Oct. 1, if concerned shippers decide to front-load more cargo in advance of a potential strike and that’s just what we are seeing.

 

• The news comes at a time when ocean container rates are rapidly rising on both coasts, straining importers in all industries. Spot rates have now risen close to 60% in six weeks, currently sitting at an average of $9,700 per 40-foot container from the Asia Pacific Rim to NY.  That’s 202% higher than the same week last year. Average rates from Shanghai to Los Angeles are $6,025, while Shanghai to New York sit at $7,299.

 

• The International Longshoremen’s Association (ILA) is seeking an almost 80% wage increase over the life of its next six-year contract with maritime employers on the East and Gulf coasts. Now this disclosure comes as the ILA over the weekend sent a 60-day notice to the United States Maritime Alliance (USMX) warning that the union is prepared to strike if a new labor deal is not signed before the current contract’s Sept. 30 expiration. 

 

• We are also hearing from the ILA just this past Saturday that locals across the East and Gulf coasts will convene for meetings in New Jersey during the first week of September to review the union’s wage demands. The ILA will also use the meetings to instruct locals on strike strategies and what to expect if the ILA is on strike at the beginning of October.

 

• ILA President Harold Daggett said in the statement that the union’s 45,000 members are ready to hit the streets if our demands are not met.

 

•  With less than 30 days to go before the end of the current master contract when these meetings are held in September,  the union will begin to prepare their locals and their ILA membership for a strike on Oct. 1, 2024. The ILA is currently seeking a $5-per-hour increase in wages for each year of the contract’s term. That represents a 76% increase over six years in the top straight-time wage for longshore workers. 

 

• The union’s wage proposal comes amid what appears to be another banner year for ocean carrier profitability as liner operators raise earnings forecasts and beat analysts’ profit estimates. The ILA’s proposed wage increase is a huge jump from the modest $1-per-hour bump that marked the previous two collective bargaining deals agreed to between the union and USMX.

 

• The wage proposal would also be much higher than the 32% wage increase that the International Longshore and Warehouse Union (ILWU) was able to secure in its contract with West Coast maritime employers, although ILWU members also secured a one-time shared $70 million bonus.  

 

• The ILA’s proposal comes amid other union victories in contract talks with employers. The United Auto Workers (UAW) was able to secure wage and cost-of-living increases that would raise wages for its highest-paid workers by more than 33% during its four-year contract with automakers. And the Teamsters were able to secure an increase of $7.50 per hour through the duration of their current five-year contract with UPS. So, the point is that these powerful unions have a track record of coming out on top in these negotiations, so perhaps just maybe this strike will be averted.

 

To summarize…..

 

There’s no doubt should a strike occur, it would be the worst-case scenario and with US election cycle in the mix and with the contract expiration coming during a tight presidential race, the current administration will wish to avoid a strike and its damaging economic consequences so that gives the ILA leverage. Last year, Harold Daggett was reelected to a fourth term as ILA president, a term lasting through 2027, meaning the next contract could be his last. With automation a non-issue, it all will come down to the contract he brings home to his rank-and-file. 

 

So far, little of this has rattled the BCOs. The fact that only periodic, short-lived walkouts at individual ports have occurred over the past nearly half century has given them the confidence to re-route large volumes of cargo away from the US West Coast, where labor disruption has accompanied every contract negotiation since the late 1990s, including the last round that was ratified last August.

 

Bottom line,  East Coast and Gulf Coast have a track record of labor peace and they have faith a deal will get done without disruption, eliminating the need to divert cargo as a precautionary measure. So, while we should remain vigilant, we must continue to watch and see how this plays out,  with several developments unsettled and container volumes currently trending upward on the Transpacific Eastbound services, we remind our community to plan and book in advance, anticipate delays, and be prepared for volatility. Should you have any further questions or concerns, please contact me as I am always at your full disposal.

 

If there are questions, I am always available –

 

Anthony D'Ambrosio

adambrosio@scsolutionsinc.com 

484-836-5896