Workers want bonuses. Shippers want robots. The supply chain hinges on a deal

The immediate future of global supply chains rests on a bargaining table in San Francisco, as the union that represents all West Coast dockers seal a new contract with the chiefs of bulk shipping.

The current contract, which covers more than 22,000 workers at the International Longshore and Warehouse Union at 29 ports on the Pacific coast of the United States, is set to expire July 1.

At stake is the continued flow of goods into the country, after two years of supply chain turmoil from pandemic shutdowns, material shortages, high fuel prices and the occasional giant ship stuck in the Suez Canal. Forty percent of all US sea imports pass through West Coast ports, with more than 30% of all containerized imports arriving at the Los Angeles and Long Beach ports, which together make up the nation’s largest port complex.

Previous contract talks have passed their expiration date and led to major disruptions in port operations, with workers and shipping companies on the table and West Coast berths being represented by the Pacific Maritime Assn. Industry group, turbulent to get a better deal.

In 2002, negotiations soured that the Palestinian Monetary Authority, which represents 70 shipping carriers and terminal operators, shut down its workforce for 10 days until the George W. Bush administration intervened. In 2014 and 2015, the Obama administration also engaged to help wind down a year-long contracting battle punctuated by slowdowns and layoffs.

The background to the negotiations is starkly different from previous rounds. In 2002 and 2015, shipping companies were facing either low profits or outright losses, as the abundance of new mega ships drove down freight rates and freight revenue.

But the past two years have brought financial rewards to shipping companies, with the industry as a whole generating more than $150 billion in profits in 2021. One of the industry pioneers, AP Moller-Maersk, had the most profitable year for any company in Danish history, with profits of $18.7 billion. dollars — a trend that Shipper continued into 2022, with profits of $6.8 billion in the first quarter alone.

All the while, total imports from Asia to the West Coast of the United States have increased over the years, giving ILWU workers more power over their crucial point in the global flow of goods. A surge in import demand has caused a historic backup at the Los Angeles Port complex over the past year, with more than 100 giant container ships parked offshore waiting to dock at certain times during the holiday season. That number has since fallen to 30 ships awaiting offloading, but as work negotiations begin this summer, supply chain experts are preparing for a new round of the shipping crunch.

“Port congestion has improved,” said Christopher S Tang, a distinguished professor at the University of California, Anderson School of Management, who studies supply chains, but “this will be short-lived because the tsunami is coming.” Peak ocean freight season typically peaks in August for the back-to-school and holiday seasons, and retailers burned by delays in previous years are getting a head start in anticipation. Besides the backlog of ships at a port in Shanghai, which has undergone strict COVID-19 lockdowns, Tang believes another crisis will arrive soon.

With the supply chain and its link to inflation in the national spotlight for the first time in decades, both sides opened talks with cautious positive rhetoric in statements made before bargaining, and a mutually agreed media blackout began.

ILWU President Willie Adams wrote that “the men and women of ILWU look forward to the opportunity to meet with their employers and to seek a contract that honors, respects, and protects good American jobs and American importers and exporters” in an open letter published in early May. James McKenna, CEO of the Palestinian Monetary Authority, said in a video statement that the organization is committed to negotiating a new contract without interruption.

Politicians have already taken their weight, urging both parties to come to an agreement. Adams was invited to a White House meeting last October for supply chain talks with President Biden, Vice President Kamala Harris and Transportation Secretary Pete Buttigieg, among others, and was joined on a tour of the port complex in November by California’s governor. Gavin Newsom and Biden’s port administration envoy John Burcari. In May, as talks began, Senator Dianne Feinstein of California published a letter to Adams and McKenna asking them to come to an understanding quickly, stating that any slowdown or disruption would “exacerbate global supply chain disruptions.”

If negotiations intensify, the Biden administration has also indicated that it will intervene. “We don’t need to be involved in these negotiations unless we have to,” Labor Secretary Marty Walsh said in an interview with Bloomberg in May.

The potential for conflict is clear. PMA CEO McKenna highlighted the fact that ILWU workers receive “world-class wages” of close to $195,000 per year on average for full-time workers, plus benefits, and stated that the PMA is committed to developing port automation.

International Media Federation President Adams responded to both points in his open letter. “We make no apologies for achieving the wages that allow workers to support their families, retirement, and health care that these challenging and dangerous jobs require,” Adams wrote, noting that “decades of prior negotiations have made long-term jobs good jobs for blue-collar workers.” “

On the issue of automation, Adams was more forceful, writing that “automation not only kills good jobs, it doesn’t move more cargo” and poses a national security risk with widespread infrastructure penetration.

After two years of working through the pandemic, with shippers booking record profits, a historically strong and orderly ILWU will likely look for increases to beat inflation, according to Jake Wilson, a Long Beach California professor of sociology who has written several books on ILWU and global logistics employment. .

“When you look at the added value and importance of the work that port workers do, it’s a small percentage of a very profitable overall system for these huge companies,” Wilson said.

West Coast port workers are the highest-paid logistics workers in the United States, but Wilson noted that “these jobs continue to be under increasing pressure — workers at docks haven’t had a raise in years, and there is a constant pressure to work more hours and work through the night and demands.” Others that may require hiring more unionized port workers.”

The numbers support Wilson’s argument. According to its annual report, the PMA paid $2.26 billion in wages in 2021, and $1.55 billion in other benefits. The shipping industry has generated $150 billion in profits.

A 10% increase across the board for West Coast Longshormen would raise labor costs on the West Coast from $3.8 billion to approximately $4.2 billion. This $400 million increase represents just over a quarter of 1% of the industry’s profit last year. The estimated cost of a 10-day downtime in 2002 was in the billions for the US economy. Ten days of lost profits from $150 billion would add up to more than $4 billion for shipping companies alone.

“What distinguishes port workers around the world is their strategic location at the choke points of the world. Working in ports provides a lot of leverage,” Wilson said. “The money is there, shippers are making huge amounts of profit, when most people are not.”

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