International Maritime
The ILA ’ s 61.5 % salary hike remains contingent on finalizing remaining contract details by Jan . 15 . Kirk Sides / Houston Chronicle via Getty Images serves as a testament to the union ’ s commitment to securing fair compensation for its members .”
The wage deal comes as ocean carriers are expected to continue reporting multi-billion-dollar profits . Among publicly traded ocean carriers , combined net income is expected to reach $ 16.8 billion in 2024 , according to S & P Global consensus analyst estimates .
Higher lift costs
Commerce that the cost of the wage deal also needs to be measured against the cost of export and empty container moves , for which there is little to no revenue .
East and Gulf coast ports are on track to handle about 19 million containers , full and empty , in 2024 , according to the ocean carrier . The new wage deal will increase its terminal unit ’ s labor costs by $ 170 per container .
“ The extra cost that US consumers will pay exceeds the entire GDP of a country like Burundi .”
Assuming a nearly similar increase across other terminal operators , the wage deal would cost the container shipping industry $ 3.2 billion per year in additional labor costs — or more than $ 19 billion over the life of the new contract — a cost the executive said will be borne directly by US consumers .
“ The extra cost that US consumers will pay exceeds the entire GDP of a country like Burundi that has a population of 13 million inhabitants ,” the executive said .
“ Somebody is paying for the empties as well , and it is not the carriers ,” the source added . “ The trade imbalance , and the resulting amount of empties , gets all priced in into what is being paid for the full import and export boxes .”
The USMX does not release figures on what it paid longshore workers . However , based on the dues contribution rate reported by the ILA in its most recent annual report to the US Department of Labor , its members were paid $ 2.9 billion in wages during 2023 .
The ILA said in a statement about the tentative agreement that the 61.5 % wage increase “ is unprecedented and
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The ILA ’ s wage increases will flow through the industry via annual rate adjustments to the container lift agreements that ocean carriers have with marine terminals , a US-based terminal executive told the Journal of Commerce . Ocean carrier members of the USMX cover 70 % of the ILA ’ s annual wage increases , while marine terminals and stevedores are responsible for the remainder .
So the $ 6 per hour wage hike in the first year of the tentative agreement , which represents a 15 % increase , means ocean carriers face a 10.7 % increase from their share , plus an annual increase indexed to overall inflation , in container lift rates .
The terminal executive said US terminal lift rates generally hover near $ 300 per container , while higher-cost regions such as the Northeast have lift costs of around $ 400 per container . Labor costs charged by US marine terminals can account for up to 60 % of their revenue , the highest share of such costs globally .
Whether terminal automation would temper costs remains unclear , the executive added , due to high upfront costs of automation technology and the uncertainty around its payback .
The most successful automated and semi-automated terminals were originally designed from the ground up specifically for those operations , meaning that it ’ s difficult to bolt on automation technology to an existing operation . Carriers are hoping that the new wage deal will be accompanied by efficiency gains to move more boxes per hour , the executive said , noting that US container ports generally rank very low versus their overseas peers in terms of efficiency .
“ Look at Europe , where the longshoremen are unionized and many of the terminals are automated but are much more productive ,” the executive said . “ When there is efficiency , it helps our ability to offset the wage increases . We ’ ll pay the higher wages but want to get something out of it in terms of productivity , not just increasing man-hours . Otherwise , this is just further inflationary pressure .”
Another US-based terminal executive said the total cost of the wage deal should be juxtaposed against the size of the investment needed to automate US terminals . The source said the higher wages are a necessary investment in maintaining stable longshore workforces along the East and Gulf coasts , but those workers still need to hit benchmarks seen at other global ports .
“ How can vessel services keep their schedules when there ’ s 35 moves per hour at Southeast Asia ports and 19 moves per hour at US ports ?” the executive asked .
email : michael . angell @ spglobal . com
November 4 , 2024 | Journal of Commerce 17