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Focus: Global Supply Chain and Logistics

Our Weekly Feature Article on Topics Related to Global Supply Chain & Logistics

From SCDigest's On-Target e-Magazine

- July 2, 2014 -


Global Supply Chain News: As Contract Expires, West Coast Longshoremen Stay on Job, as Realities Said to Auger Labor Peace

ILWU Wants More, but West Coast Ports Losing Share While Panama Canal Expansion Looms

SCDigest Editorial Staff


The contract between the International Longshore and Warehouse Union (ILWU), which represents dockworkers, and the Pacific Maritime Association, representing West Coast ports and terminals, officially expired this week, but as expected the Longshoremen kept showing up for work.

It is likely that talks will go on for weeks, and although there are several major issues, including potential significant changes to the healthcare plan for the ILWU and how fast and far port automation will advance (see Little News on How West Coast Port Negotiations are Going, but Serious Issues are on the Table), the language on both sides has thus far been cordial, as experts say the challenges of port competitiveness are likely to somewhat mute union demands.

SCDigest Says:


West Coast ports' share of US shipping trade volume fell to 43.5% in 2013 from 48.% in 2008, even before the looming impact of the Panama Canal expansion.

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"Dockworkers are looking forward to negotiating a fair agreement that protects the good jobs and benefits that support thousands of families and dozens of communities around West Coast ports," ILWU president Bob McEllrath said in a statement before the union suspended further comment during the talks.

"There hasn't been a lot of saber-rattling on either side," said George Lovell, chairman of the Harry Bridges Center for Labor Studies at the University of Washington in Seattle. "This is a climate in which both sides have an interest in getting this settled."

Two external issues are in a sense hanging over the negotiations. First, the not too distant memories of the bitter dispute between the two sides in 2002, which eventually led to a lockout by the PMA that shut the ports for 10 days. That halt only ended after then President George Bush invoked the rarely-used Taft-Hartley Act, forcing dock operations to resume. The stoppage was said to have cost the US economy $1 billion per day back then.

Twelve years later, the impact from a port stoppage by strike or lockout is now being estimated at something like $2 billion per day – a figure neither side wants to "own" in a still tepid US economy.

Second, West Coast ports from Seattle to San Diego are under competitive pressure, as trade volume growth slows and the expansion of the Panama Canal is set to open in 2015. That could lure importers to take containers all the way to East Coast ports from Asia, rather than coming into the West coast and using rail to move containers East. Rising fees at the West Coast ports and terminals will of course be a factor in that decision.

That competitive pressure is both outside and within West Coast ports as a group. In 2012, for example, the consortium known as shipping's Grand Alliance - Germany's Hapag-Lloyd, Japan's NYK and Hong Kong's OOCL - left Seattle for Tacoma, Wash., effectively shifting 20% of Seattle's container intake to its competitor 30 miles south. Costs were an important factor.

(Global Supply Chain Article Continued Below)



As shown in the graphic below, courtesy of the Wall Street Journal, West Coast ports have been losing share on the left coast itself to terminals in Canada and Mexico.


The West Coast ports are responsible for almost half of all US maritime trade, including more than 70% of imports from Asia. However, West Coast ports' share of US shipping trade volume fell to 43.5% in 2013 from 48.% in 2008, even before the looming impact of the Panama Canal expansion. That competitive pressure is nudging management and labor toward an amicable settlement.

"Labor definitely has become easier to work with," Michael Patalano, general manager of SSA Terminals in Seattle, recently said.

The average wage for stevedores on the West Coast is over $40 per hour, including various "skill" rates add-ons that raise some workers' pay, in addition to very generous benefits in terms of healthcare, retirement and vacation time. Under the just expired contract, base wages start at $35.68, up from $28.18 in 2003, an increase that the ILWU says barely matched inflation.

Our guess - a new contract agreed to around the first of August, though the healthcare issue, in which coverage for workers would be considered a "Cadillac plan" under the new Obamacare rules and cost ports $140 million in new costs annually, may prove to be a tough nut to crack.

What do you expect from the West Coat pprt negotiatons? Do you see the ports there as losing competitiveness? Let us know your thoughts at the Feedback button (email) or section (web form) below.


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