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As if procurement professionals didn’t have enough supply chain-related issues on their plates right now, a possible dock worker strike impacting more than 22,000 union employees at 29 West Coast U.S. ports could bring ocean freight and logistics operations to a grinding halt if successful negotiations don’t happen soon.
At issue is an International Longshore and Warehouse Union (ILWU) contract that will expire at the end of June 2022. According to The New York Times, nearly three-fourths of the union members work at the ports of Long Beach and Los Angeles, the primary gateways for shipments coming to the U.S. from Asia.
“A labor impasse could worsen the floating traffic jams that have kept dozens of ships waiting in the Pacific before they can pull up to the docks,” Peter S. Goodman writes in The New York Times. “That could aggravate shortages and send already high prices for consumer goods soaring.”
Unprecedented Volumes of Cargo
Goodman goes on to say that the dockworkers whose contract expires in June have moved “unprecedented volumes of cargo during the pandemic,” and that they’re well aware of the fact that the shipping terminals—controlled by global carriers—have seen their profits rise during the pandemic.
According to the publication, the union’s contract previously expired in 2014 and that the event created “pronounced turmoil” at the ports. This time, odds for a deal without drama are “50-50,” Pacific Maritime Association’s (PMA) Jim McKenna told The New York Times. “The last four contracts ended up in some sort of disruption.”
McKenna said the union had yet to outline its demands and that it won’t be engaging in discussions before May 2022.
What’s at Issue?
In outlining the key issues in the U.S. West Coast dockworkers contract, Rafael Azul said the
ILWU is bracing for a contract battle that, if not resolved, will impact 29 ports in Washington, Oregon and California that account for 44% of all U.S. container traffic. The PMA bargains on behalf of 70 terminal operators in the region, and had asked the ILWU to postpone negotiations for one more year.
Maritime Executive says the ILWU declined the PWA’s request for a one-year extension citing the important role of collective bargaining to maintain the attractiveness of the profession. “They cited the shortages of workers in other segments from warehouses to truck drivers,” the publication adds, “saying that it is critical to maintain a vital workforce.”
Maritime Executive says the union hasn’t conducted contract negotiations with the PMA since 2014. Three years later, union members voted to accept a three-year extension for the contract to July 1, 2022 in exchange for increases in wages and pensions while maintaining health benefits at current levels.
According to Azul, the current contract negotiations are taking place in a shipping environment where workers are facing “mandatory around-the-clock work schedules, while wages are being ravaged by runaway inflation.” Shipping rates are also skyrocketing, with the average container coming from Asia to the U.S. now costing $14,000 to ship (and in some case much higher), versus about $1,750 pre-pandemic.
It’s likely that the dock workers who move the related goods will be vying for their fair share of these major price and profitability increases. “Last year was a record year for profits,” Azul writes, “with Danish-based Maersk raking in $5.9 billion in gross profits in the third quarter of 2021 alone, the best single quarter in the company’s 117-year history.”
Ready to negotiate
As the ILWU and PMA prepare to buckle down and hash out the contract negotiations, procurement professionals should be paying attention to the outcomes and factoring the possibilities into their buying strategies. And while the final outcome has yet to be decided, the past tells us that there may be some contentious negotiations and possible supply chain disruptions in the cards.
“There is a long history of contentious labor negotiations and disruptions at the ports,” Maritime Executive points out. “The union staged nine months of slowdowns during the last contract negotiations. Experts point out that there were disruptions tied to each of the bargaining efforts over the past 30 years.”
