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Both Sides Confirm Port Labor Contract Talks Likely to Run Past July 1

The union representing some 22,000 dockworkers at ports along the West Coast and employers confirmed Tuesday contract talks continue with no plans for a strike or lockout, even as both parties said negotiations are likely to extend past the July 1 deadline.

The International Longshore and Warehouse Union (ILWU) and Pacific Maritime Association (PMA), the group representing employers, said in a joint statement Tuesday they’re “committed to reaching a new agreement.”

“Both the PMA and ILWU agree that they are unlikely to reach a deal before the July 1 expiration of the current agreement,” the joint release said. “This timing is typical, and cargo operations continue beyond the expiration of the contract. Neither party is preparing for a strike or a lockout, contrary to speculation in news reports. The parties remain focused on and committed to reaching an agreement.”

CNBC reported Friday that Port of Oakland union officials moved a planned stop-work meeting on Monday to daytime hours to allow for workers to observe the Juneteenth holiday, citing an internal document. The federal holiday is Sunday but being observed by many employers on June 20.

The planned stoppage is not a strike. Stop-work meetings are built into the labor contract with terminal operators and are held to discuss union-related matters.

The union was criticized in February 2015 by then-Oakland maritime director John Driscoll when the stop-work meeting was moved to the day shift as union officials and employers were in the midst of hammering out a contract that had expired in the prior year.

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Driscoll had called the meeting’s shift to daytime hours “damaging to shippers” and also stood to “cripple our ability to support global trade and the economy of the Bay Area.”

The current contract talks began May 10 and have seen one temporary halt between May 20 and June 1.

Industry groups have called for intervention from the White House even prior to the start of negotiations to avoid any possible disruption to an already dislocated supply chain.

ILWU and PMA officials met with President Biden on Friday when he visited the San Pedro Bay port complex and delivered a speech on a range of topics, including inflation and the Ocean Shipping Reform Act.

The ILWU and PMA said they discussed the collective bargaining agreement along with supply chain congestion, among other topics, with Biden.

Everstream Analytics intelligence solutions analyst Anthony Yanchuk said Tuesday in a webinar on navigating the dockworker contracts that drawn-out negotiations could impact as much as 40 percent of containerized traffic.

Yanchuk pointed to what’s planned for Oakland next week as a possible preview of what’s to come.

“Given the proximity to the [current contract] expiration on July 1, the [Oakland stop-work meeting] could provide a lot of good insights into how labor actions at a West Coast port could cause some kind of disruptions,” Yanchuk said.

Any implications of a work slowdown or stoppage should be viewed in the context of bottlenecks, such as what’s anticipated to be created by a potential surge in imports from China as COVID-19 lockdowns lift and production there picks up.

“Analysts expect congestion to increase in that robust China [import] surge and potentially create severe bottlenecks,” Yanchuk said. “We’re also seeing for the first time in a long time, carriers start to make weekly rate adjustments, which is a fundamental indicator of oversupply in certain spot markets. And we saw shippers build up a lot of capacity to deal with that congestion that was happening in Long Beach and other West Coast ports moving in the earlier part of this year. We’re now seeing a lot of oversupply from that side.”

Everstream data has already shown what happens when shippers redirect freight to West Coast port alternatives with vessel queues and wait times rising at port facilities in Houston, Mobile, Ala., Norfolk, Va., and Savannah, Ga.

On the flipside, new routes from Asia to Mexico have emerged.

“There’s a lot of demand now for alternatives in new routes that may potentially go around the labor actions that may occur at ILWU ports,” Yanchuk said.

Implications of Monday’s House vote pushing through the Ocean Shipping Reform Act of 2022 (OSRA22) on labor negotiations remains to be seen, the analyst added.

The bill, which now goes to President Biden to sign, provides mores oversight power to the Federal Maritime Commission (FMC) to regulate the carriers on matters such as service to U.S. exporters and how ocean liners invoice and charge detention and demurrage fees to shippers.

Passage of the bill has been hailed by supporters as a mechanism for partially addressing inflation, while also tamping down on what shippers have called unfair business practices on the part of carriers.

The World Shipping Council (WSC), which represents ocean liners, has long described efforts to tie high freight rates to supply chain disruptions and inflation as a “mischaracterization.” The organization has instead called for more infrastructure spend to help relieve congestion.

“The increased rate levels we have seen over the past years are a function of demand outstripping supply and landside congestion, exacerbated by pandemic-related disruption,” WSC said in a statement released Monday, following the House vote on OSRA22.

The sentiment was supported by findings from a two-year investigation by the FMC that concluded high rates stemmed from strong consumer demand.