A dockworker walkout that shut down the ports of Los Angeles and Long Beach yesterday is expected to continue through the Easter weekend as contract renewal talks deteriorate, but its trade impact could be muted by a recent slump in West Coast container volumes.
The twin West Coast ports closed on Thursday evening, citing a manpower shortage. Industry sources called the work stoppage a “concerted action” taken by the International Longshore and Warehouse Union (ILWU) in relation to labor talks that have been ongoing since May, 2022, Kansas-based Noatum Logistics said today.
The stoppage may have major impacts on inventory flows, but it did not come as a surprise, and some logistics companies have been preparing for this event for months. Import and export companies have been closely tracking negotiations ever since the contract between the ILWU and the Pacific Maritime Association (PMA) that represents the interests of ocean carriers and terminal operators expired in July 2022.
Fearful of a repeat of the dock closures that rocked supply chains in 2015, many companies have already begun routing their shipments away from the vulnerable West Coast ports. According to Noatum, volumes at the Southern California ports have already dropped sharply as retailers and manufactures are diverting goods to the East and Gulf Coasts due to the threat of union unrest.
In a statement today, the Pacific Maritime Association said that negotiations for a new coastwise contract still continue, but warned that the shutdown is already crimping regional trade. “The action by the Union has effectively shut down the Ports of Los Angeles and Long Beach – the largest gateway for maritime trade in the United States,” the PMA statement said. “These actions undermine confidence in West Coast ports, and threaten to further accelerate the diversion of discretionary cargo to Atlantic and Gulf Coast ports. The health of the Southern California and state economy depend on the ability of the Ports of Los Angeles and Long Beach to stem this market share erosion."
As industry groups look for solutions, some say that although the union is huge—its contract is set to cover more than 22,000 dockworkers at nearly 30 ports throughout the U.S. West Coast—those slumping West Coast container volumes could be weakening its bargaining power.
“The ILWU has lost leverage because of the low volumes on the West Coast, which further solidifies the stance that PMA is taking in negotiations in the near term,” Paul Brashier, vice president of Drayage and Intermodal for the Nevada-based third party logistics provider (3PL) ITS Logistics, said in the firm’s US Port/Rail Ramp Freight Index. “With volumes where they are now on the West Coast and the diversions to the East, the ILWU is not in a strong negotiation position. I also do not believe the Biden Administration will tolerate more than work slowdowns with inflation currently being of significant importance.”
Trade associations have been pressuring the White House since last year to work with members of the PMA and the ILWU to reach a new labor agreement at the ports. And the Biden administration recently intervened to resolve labor disputes between freight railroads and rail labor organizations, signing a Congressional bill in December that imposed a labor agreement between the parties.
Gartner, Inc.