Thursday, August 23, 2012

Shippers, East and Gulf Coast ports prepare for possible work stoppage

East and Gulf coast ports as well as shippers are preparing for the likelihood of a strike beginning Oct 1 when the current labor contract expires on September 30. The on again, off again talks between the International Longshoremen’s Association (ILA) and the US Maritime Alliance appear to have broken once more. In fact, the ILA president, Harold Daggett told the Journal of Commerce, “It looks like we’re going to have a strike”.

Among the contentious points under discussion are productivity and efficiency improvements such as automated cargo-handling equipment. The ILA is not in favor of these improvements because of loss of jobs these improvements may bring. The group is seeking job protection under the new contract.

The International Longshore and Warehouse Union (ILWU) which represents West Coast dockworkers is keeping a close eye on the negotiations (or lack of) particularly as it will face the same issues when its own contract comes due in mid-2014. Still, not surprising, the ILWU has noted that it fully support the International Longshoremen’s Association. This support could result in a work stoppage on both coasts – a situation that has not occurred since 1977.  

As a result of the growing uncertainty surrounding the ports, many shippers have either already shipped goods early or are diverting cargo to the West Coast, Canada or Mexico in response to a growing possibility of a work stoppage at the end of September. This shift away from the East and Gulf coasts will not only have a negative financial impact on the ports themselves, but also on Class I railroad companies, CSX and Norfolk Southern, both of which have made major investments in track and intermodal hubs with connections to these ports. The trucking industry is likely to be impacted as well, particularly those trucking companies such as JB Hunt that rely on intermodal movements.
The potential threat to the traditional peak season is minimal as the contract expiration is at a time in which the peak season is winding down. Still, there is a possibility that peak season for the ocean freight industry may have started much earlier in July. According to Zepol, US import TEUs increased 9% month to month for July, making it a record-high for the year in terms of import volume per month.