As the current labor agreement between West Coast shippers and dockworkers is set to expire July 1, logistics companies say a port strike would divert more traffic to Gulf Coast and East Coast ports and worsen delays, shortages and cost increases for a multitude of industries, including agriculture.
The International Longshore and Warehouse Union, which represents about 22,000 workers at 29 ports, and about 70 employers represented by the Pacific Maritime Association have been in talks since May.
At issue are wages, as shippers made a reported $150 billion in profits in 2021, and proposals to improve automation at ports. Ship owners and ports have advocated for better use of technology as the ports of Long Beach and Los Angeles were ranked last in the 2021 World Bank’s Container Port Performance Index, according to the New York Post.
The union and PMA issued a joint statement in mid-June announcing they were unlikely to reach a deal by the end of their current contract at 5 p.m. July 1. The two sides reassured President Joe Biden’s administration that they were committed to continuing negotiations and avoiding a strike or lockout.
But despite the talk of labor peace, the negotiations could be more contentious behind closed doors, said Andrew Bower, sales director in the liquid logistics division at OEC Group, a major logistics provider. One reason is that the increasing demand for containerized cargo through West Coast ports has been a financial boon for carriers.
“If you look at their earnings, they’re making more in a quarter than they have in the last 10 years," said Bower, who is based in Galveston, Tex.
The last contentious contract negotiations in 2014 and 2015 caused backlogs at Western ports, as work stoppages and slowdowns eventually prompted then-President Barack Obama’s administration to intervene.
“It took them nine months to get a deal done,” Bower told Farm Progress. “At that time, carriers were hurting, so the tables are turned. The unions are looking at carriers saying, ‘We want a piece of this.’ It’s a very contentious thing.”
Ag already smarting
At the eye of the storm is West Coast agriculture, which is already smarting from backlogs at ports caused by container shortages and other supply chain disruptions. California nut marketers, for instance, have seen their shipping times increase dramatically, if they're able at all to move product to international markets.
Jim Zion, managing partner of Meridian Nut Growers in California, reported last summer he had a load of tree nuts take 77 days to get to Spain, up from more typical transit time of 35 days. A port strike would make matters worse.
“A port strike would be devastating to our business, especially if it lasted into the busy harvest and shipping seasons for late August forward,” Zion said in an email. “We understand both sides are talking trying to avoid a strike, but you never can be assured of a positive outcome.”
But a strike would have “knock-on effects” on agriculture and other industries across the country, said Bower, whose employer contracts with ocean freighters and trucking companies to facilitate end-to-end shipments for businesses.
“With how tight most supply chains are, I think it would not be overstating to say it would be catastrophic,” Bower said. “In the very immediate term, I think what we’d see is a demand shift from importers in terms of how they book cargo.
“Instead of Shanghai to LA, they’d immediately start looking at coming into Houston and doing whatever it takes to avoid the West Coast,” he said. “It would be a real imbalance for other ports in the United States. We’d immediately see higher demand for imported goods.”
Houston’s port has already seen an increase in demand of 30% to 40% in the past year, which has created space limitations for containers on the dock that have delayed both incoming and outgoing vessels, he said.
But with a West Coast strike, the East Coast would be overloaded “very quickly,” too, either because of sympathy work slowdowns or significantly increased workloads that exceeded their ability to unload and process containers, notes Riverside Logistics, another third-party logistics firm.
'So many challenges already'
A work stoppage would also negatively impact the trucking industry, which would have fewer west-to-east runs, according to Riverside.
“There’s a real interconnectedness in what we do,” Bower said. “That means every single variable has to be aligned. You could have nine things working, but if the 10th thing goes poorly, it backs up everything else.
“We have so many challenges already – trucking shortages, congestion on ports, congestion on rail,” he said. “It would be one more imbalance that’s going to drive prices up and create further shortages in port cities.”
Supply-chain backlogs started with the COVID-19 pandemic, as Americans in lockdowns “just started buying on Amazon” and had government stimulus checks to facilitate the spending, Bower said. “That’s where the 30% to 40% increase came from in consumer demand,” he said. “We’ve been playing catch-up ever since and we’ve not done it yet.”
With the demand increase, shippers have been bidding up the price of freight. While the spot rate for 40-foot container a few years ago was less than $2,000, it topped $20,000 last year and has recently been hovering under $14,000, the Long Beach Post reported.
The logistics companies say some importers could benefit by partnering with a third-party forwarder who can help them prioritize continuity and service over price.
“If you have a logistics partner, they can sit down and say you’re going to pay more here up front, but here’s what we can do for you on the back end,” Bower said. “The other thing is to find a partner who can get you more favorable terms, such as a slightly better storage rate or more free days, or who treats trucking companies better.
“In the long run, it’s going to save you money and build goodwill with your clients,” he said. “You’ll be the ones who are always on time and always has inventory when others are stocking out … We’re really focused on partnership rather than what it’s going to cost.”