Labour talks at US West Coast ports could further stress supply chains

SUPPLY chains could be in for more turmoil as talks to negotiate a new labour contract for the US West Coast ports kick off on May 12.

Christian Roeloffs, founder and chief executive of Container xChange, an online marketplace for container trading, said: "We know that the port labour unions are very aggressive negotiators, and the event has historically resulted in work stoppages in the past. If that happens this year too, it will cause unloading and loading of cargo to be practically impossible.

"This will, of course, lead to disruptions at the beginning of the early peak season in shipping, a crucial time for the shipping industry."

The issue of port automation is going to be a key pain point, say market watchers. The existing contract, between the International Longshore and Warehouse Union (ILWU) and employer group Pacific Maritime Association (PMA), expires on Jul 1. The union had earlier agreed to allow terminal operators to automate container handling at ports on the West Coast; locally, 3 terminals out of 13 are either fully automated or use some form of automation.

"Now the union has completely changed its view, and wants to deny the terminal operators the ability to automate their terminals," said Roeloffs. 

There are already signs of bickering.

A study commissioned by the PMA (which represents the shipping lines and terminal operators at the ports) that was released this week stated that automation at maritime terminals has actually more than doubled the paid hours for employees, compared to those who work in non-automated terminals in the same ports.

"Contrary to fears of job losses, the higher output due to automation at the San Pedro Bay ports has increased, not reduced, ILWU jobs and work opportunities, including training and upskilling," the report said.

The ILWU Coast Longshore Division responded with a statement calling the report "a self-serving document" and "an insult to all workers who have seen their jobs outsourced to machines".

"The bottom line is that automation has destroyed Longshore jobs," the ILWU said in a tweet. "Container volume has increased at the automated terminals, but this has been at the expense of the other terminals that have had an offsetting drop in container volume."

Judah Levine, head of research at global freightbooking platform Freightos, said he too expects negotiations to continue past the expiration of the existing contract.

With Asia-US West Coast rates still at 10 times pre-pandemic levels and peak season only a couple of months away, any work slowdown or stoppages would only exacerbate existing delays and congestion, he added.

Compounding this issue is the fact that global supply chains are already strained due to the pandemic. More recently, Covid-19-induced lockdowns in China have restricted the movement of logistics and port manpower; the war in Ukraine is adding further disruptions to the flow of goods.

"Amid all this, the negotiations will only act as another instrument of disruption if the negotiations lead to closures or slowdowns, which, in all probabilities, is an expectation," Container xChange's Roeloffs told BT.

The only thing going for negotiations this year is that this is a "very high priority" for the US President Joe Biden. What might be key is that both sides come to an agreement without slowdowns or strikes.

"ILWU leadership has made statements to the effect that the union is optimistic about coming to an agreement," said Freightos' Levine. "Also, the White House has been meeting with both parties - the ports and the union - to encourage them to come to an agreement, as the administration wants to avoid any issues that could disrupt the supply chain."

A report by the Royal Bank of Canada published on May 3 says one-fifth of the global container ship fleet are stuck in congestion at various major ports.

"Logic suggests that as China grapples with Covid, US port congestion would improve, given the slowing conveyor belt of ships crossing the Pacific. Instead, the Ports of Los Angeles and Long Beach continue to struggle to hit the reset button," said the report.

The report noted that current turnaround time for each vessel is 6.9 days at the ports of Los Angeles and Long Beach, compared with 5 days a month ago, and 3.4 days prior to Covid.