Port labor talks pose new complication for supply chain

West Coast dockworkers and stevedoring companies are set to begin contract negotiations this week that carry high stakes for a U.S. economy that has been ravaged by supply chain disruptions.

The labor negotiations cover approximately 22,400 workers at 29 ports, including major Southern California facilities that are the nation’s busiest gateway for imported goods. Similar negotiations have been lengthy and contentious in previous years, causing major disruptions and delays in the flow of goods.

Rarely have the risks been as high as this year.

Bargaining between the International Longshore and Warehouse Union and cargo handling companies is set to begin on Tuesday, two years after a severe supply chain crisis sparked by the Covid-19 pandemic began. hurt factory production, hampered retail sales and helped push inflation to its highest level in 40 years.

The sides are to meet in San Francisco just as U.S. ports are clearing a backlog of container ships and shipping rates that have hit record highs appear to be stabilizing. But shipping officials say freight networks remain fragile, especially as talks could heat up and tensions mount just as a new surge of imports is expected to hit ports this summer in beginning of the high navigation season.

“If anything further disrupts the supply chain, it will be devastating,” said Jim McKenna, who as head of the Pacific Maritime Association will lead labor negotiations on behalf of employers, including some of the largest shipping companies in the world.

ILWU International President Willie Adams wrote in an open letter dated Friday that the union seeks “a contract that honors, respects and protects good American jobs and American importers and exporters.”

Importers of everything from furniture to toys to U.S. exporters of farm and other products are bracing for potential fallout, not just because 40% of U.S. imports by sea pass through the 29 affected ports. by the talks, but also because past negotiations have led to serious disruptions.

Disagreements between management and workers during two of the three most recent contract negotiations, in 2002 and 2014, caused shipment delays that cost manufacturers and retailers millions of dollars in lost revenue.

Dockworkers are expected to demand higher wages, better benefits and limits on the automation of cargo handling facilities. Industry representatives and observers say the union is entering negotiations in a stronger position than usual.

Union workers maintained operations throughout the pandemic and handled record freight volumes. Foreign-based shipping lines, which own numerous cargo-handling facilities in ports, cannot plead poverty after raking in billions of dollars in profits in a market where supply continues to outstrip demand. The White House, which has the power to intervene if talks reach an impasse, is also seen as pro-worker.

Few industry officials expect the talks to be resolved by the time the current contract expires on July 1.

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During previous labor negotiations, the federal government began to pay close attention to negotiations after they lasted for months, industry officials said. By contrast, notes Brian Ossenbeck, senior transportation and logistics analyst at JPMorgan Chase & Co., the Biden administration has focused on ports for more than a year, issuing executive orders and pushing companies to logistics and shippers to modify their operations in order to decongest.

This year’s talks are also taking place against a backdrop unprecedented in recent memory.

The breakdown of the 2014-15 talks was marred by accusations that work was slowing down and dozens of container ships rolled back off the Californian ports of Los Angeles and Long Beach during the dispute. This year’s negotiations begin with more than 30 ships already waiting offshore due to supply chain congestion, although this is down sharply from the more than 100 ships that were saved at the start of 2022. .

Shipping customers have become so accustomed to dealing with port congestion over the past two years that many have adopted mitigation strategies, ranging from holding more inventory to moving goods through ports on the coast. East and Gulf Coast. Some shippers are already leveraging these lessons by ordering back-to-school and holiday items earlier or moving shipments to other hotspots.

Write to Paul Berger at [email protected]

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