Commentary Trading Places

By Peter Tirschwell

Shippers who have come to trust labor to keep the peace at East and Gulf coast ports must now consider alternative gateways .

Nearly a half century of labor peace on the US East and Gulf coasts has been thrown into doubt with negotiations canceled on June 10 by the International Longshoremen ’ s Association ( ILA ) as the clock ticks down to the expiration of the current contract on Sept . 30 .

Unlike West Coast dockworkers , who worked for more than a year in 2022 and 2023 without a contract as a new deal was negotiated , the ILA says it will not work if no contract is in place , a possibility some longtime management sources contacted by the Journal of Commerce say they are taking seriously .

The union has thus ratcheted up pressure on the ocean carriers that dominate the United States Maritime Alliance ( USMX ), the employer group , to agree to robust wage increases the union feels it ’ s entitled to , given the all-time high profits earned by container lines during the COVID-19 pandemic .

Although the ILA ’ s rationale for calling off scheduled talks was its allegation that APM Terminals in Mobile utilized technology in violation of the current contract , a charge APMT denied , the fate of the negotiations will hang on wages .

“ The union views this current Master Contract negotiations with ( USMX ) as a pivotal moment for them , knowing that the member companies who employ ILA labor have made massive profits in recent years , while failing to reward the workforce responsible for these gains ,” the ILA said in a statement June 12 .

“ When negotiations resume , the union expects to demand salaries and other benefits for ILA members that are as lucrative as the profits of USMX member companies ,” the union said . “ The threat of a coastwide strike on Oct . 1 , 2024 , is becoming more likely .”

Such words are a sharp departure from the low-key , business-like approach to prior East and Gulf coast negotiations , and thus unfamiliar to shippers trying to weigh the risks .

Shippers who have come to trust labor to keep the peace at ports such as Houston , Savannah , Virginia and New York and New Jersey , among others , are now forced to consider alternative gateways such as Los Angeles and Long Beach .

But West Coast routing options are limited by the current surge in import volumes combined with inadequate vessel and container equipment capacity , which has led to spot rates in the eastbound trans-Pacific to triple to over $ 7,000 per FEU since mid-April .

The paradigm is a new one . As of earlier this year , it was understood that the ILA wage levels would be benchmarked off the increase obtained by the International Longshore and Warehouse Union ( ILWU ) in its negotiations concluded last year .

But the position of the ILA now is an implicit rejection of that construct ; the 32 % wage increase obtained by the ILWU was far lower than the doubling of wage levels the union was seeking before it accepted a lower increase after intervention by the Biden administration .

That scenario is unlikely to be repeated on the East and Gulf coasts . It ’ s an open question whether President Joe Biden will be able to exert the same level of influence on the ILA . For example , as an unabashedly pro-union president — the first president to walk on a picket line — it would be almost inconceivable for him to force the ILA back to work through a Taft-Hartley injunction , which was last used by George W . Bush in 2002 .

The ILA endorsed Biden in March of 2020 , but has yet to issue an endorsement in the current race , even though it has traditionally backed Democratic candidates . ILA President Harold Daggett met with former president Donald Trump earlier this year .

It ’ s possible to envision how events could unfold . In the last weeks of the presidential campaign , Biden will not want to see a strike affecting the 43 % of laden US imports that move through East and Gulf coast ports .

Biden ’ s personal intervention in port congestion issues during the pandemic showed the political liability he faces from clogged up ports and its association in the popular imagination with inflation , one of his chief liabilities .

The ILA would point the finger at the carriers for holding up the negotiations , an argument that Biden would likely be receptive to given that he had no problem blaming carriers for the pandemic disruption ( remember “ I ’ d like to pop them ”?). Carriers will be hard pressed to respond convincingly given that high rates and profits have reappeared over the past eight weeks .

Moreover , when interacting with US longshore labor , ocean carriers over many years have capitulated to union demands based on a desire to keep cargo , ships and other assets flowing , leading to the six-figure incomes enjoyed by full-time dockworkers .

One thing is clear : The risks associated with East and Gulf ports have increased exponentially .

email : peter . tirschwell @ spglobal . com

46 Journal of Commerce | July 1 , 2024 www . joc . com