West Coast port operations to continue if no labor agreement is reached by July 1 deadline—which is likely

As negotiations between the union representing tens of thousands of West Coast dockworkers and the agency representing their employers continue, neither party expects a deal to be reached prior to the July 1 expiration of the current agreement, according to a joint statement.

Heading into discussions, there were concerns from industry experts that negotiations between the International Longshore and Warehouse Union, which represents more than 22,000 workers at 29 ports, and the Pacific Maritime Association could become contentious and cause further disruption to the already overburdened supply chain.

The two parties, however, have stated no such disruptions will take place.

“This timing is typical, and cargo operations continue beyond the expiration of the contract,” the groups said in a joint statement Tuesday. “Neither party is preparing for a strike or a lockout, contrary to speculation in news reports.”

Fears in the industry stem from previous negotiations, which have seen workers strike and employers lock out employees more than once over the past two decades.

In 2002, heated negotiations led to PMA, which represents dozens of ocean carriers and terminal operators, locking out its workforce for 10 days. An agreement was reached only after the Bush administration intervened.

Contentious, yearlong contract negotiations in 2014 and 2015 again saw the federal government step in—this time the Obama administration. During that dispute, workers engaged in slowdowns and stoppages.

Leading up to the current negotiations, West Coast dockworkers spent over two years moving record amounts of cargo amid the global coronavirus pandemic. At the ports of Long Beach and Los Angeles, the largest port complex in the United States, monthly and annual cargo records have been set repeatedly.

The twin ports alone account for more than 30% of all U.S. imports.

After the initial shock of the pandemic that saw cargo volumes drop briefly, volumes surged as Asian ports reopened and online shopping exploded due to stay-at-home orders. The demand has not subsided, and the ports continue moving record amounts of cargo amid supply chain congestion, which, at one point, saw more than 100 ships sitting idle off the Southern California coast.

As of Wednesday, the backlog of container ships was 29, according to the Marine Exchange of Southern California. The ports, however, are already gearing up for their peak season, which typically begins in August ahead of the new school year but is expected earlier this summer, according to Port of LA Executive Director Gene Seroka.

Heightened demand has led shippers to increase rates exponentially. A few years ago, the spot rate for a 40-foot container from Asia to the U.S. was less than $2,000, Bloomberg reports. Last year, the rate topped $20,000 and has recently been hovering just under $14,000.

High demand and increased rates have resulted in exorbitant profits for shippers to the tune of $150 billion in 2021, according to Bloomberg. During the first quarter, the container industry had a profit just shy of $60 billion, marking the sixth consecutive quarterly record, Seatrade Maritime News reports.

Record profits have a cost for shoppers, however, economists warn. Extended periods of heightened freight costs are fanning inflation, economist Nicholas Sly told Bloomberg.

Union leaders are likely looking for raises that outpace the historic inflation that is hitting Americans’ wallets hard, Jake Wilson, professor of sociology at Cal State Long Beach, told the Los Angeles Times.

“What’s really unique about dockworkers around the world is their strategic location in the world’s choke points. Working in the ports provides a lot of leverage,” Wilson said. “The money is there, the shippers are accumulating massive amounts of profit, while most people aren’t.”

While profits should be able to cover demanded pay raises, PMA recommitted itself to advancing automation at the ports—likely a sticking point with workers. Shippers and terminal operators claim increased automation would increase efficiency at ports and allow for higher throughput. Dockworkers, however, maintain that automated container movement is less efficient and would cost thousands of jobs.

While port officials are not part of negotiations, they do work closely with both parties involved. Port of Long Beach Executive Director Mario Cordero recently said automation should not be the focus of ports—at least not now.

“Before we spend money on that type of infrastructure, let’s explore how we can create velocity with the resources we have today,” Cordero said in a June 2 interview. “We can substantially increase velocity and productivity … with the workforce we have today, which has been so essential working day in and day out since the beginning of this pandemic.”

Cordero has been a proponent for moving the U.S. supply chain, including terminal operations, trucking and warehousing, to a 24-hour model, which is used in Asian ports and others around the world. The majority of cargo into the San Pedro Bay ports comes along transpacific routes from Asian countries.

To that end, several pilot programs are underway to test the 24-hour model at the ports of Long Beach and LA.

“The good news is that 24/7 is no longer just a vision,” Cordero said. “It is something that now has legs. We have opened the door.”

May marked 2nd busiest month ever for Port of Long Beach

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Brandon Richardson is a business reporter, covering everything from real estate and healthcare to the airport and port to city hall and the economy. He is a Long Beach native who has been with the Business Journal since graduating from Long Beach City College in spring 2016 with an associate’s degree in journalism. He is an avid record collector and concert goer.
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