The clock is ticking as the Pacific Maritime Association and the International Longshore and Warehouse Union negotiate a new contract with US West Coast ports. The current contract is set to expire June 30. Memories are still fresh from last year’s protracted negotiations with East Coast ports as well as that of memories of the 2002 10-day strike that likely will hang over the negotiations. That strike cost the US government $1bn a day and it took months to clear up the backlog.
However, that was 2002, it is now 2014 and times have changed – A global recession, increasing competition among Canadian and Mexican ports as well as those along the US East Coast and changing trade lanes. Also, overcapacity has taken a toll on the industry.
To be on the safe side shippers are ordering early. According to the Global Port Tracker report released by the National Retail Federation and Hackett Associates noted that import volumes are expected to increase 7.5% in June as shippers look to avoid any potential disruptions.
Indeed, actual data suggests shippers may have started moving goods even earlier in anticipation to a possible disruption. The latest data, which is for the month of April, shows inbound TEUs up 11.43% and outbound TEUs up 8.0% for the Port of Los Angeles.
Meanwhile, the Port of Long Beach reported loaded inbound TEUs increased 3.4% while loaded outbound increased 4.0% for the same period.
Topics of negotiation may be similar to those that were discussed during the East Coast contract negotiations in 2012-2013 – pay increase, healthcare costs and job security among the few. During the East Coast contract negotiation job security versus new technology proved to be a sticky point and could likely be the same for West Coast talks. With additional competition from other ports, domestic and international, there is a need to improve efficiencies which includes technology enhancements.
In fact, according to industry analysis, the Los Angeles-Long Beach market share of Asian containerized imports has declined from 56.5% in 2003 to 48.8% in 2012.
The question of “What if” is on the minds of many – shippers, ports, dock workers, logistics providers and ocean carriers – It appears that many shippers have taken the necessary measures ahead of any potential disruption. However, if there is indeed a disruption, it is likely Canadian West Coast ports will benefit the greatest. Mexico’s Port of Lazaro Cardenas is still in control of federal troops as it fights illegal drug activity. East Coast ports could also see a pick up as could air freight.
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)