Disruptive Impacts from Planned Port Strikes in Spain

Disruptive Impacts from Planned Port Strikes in Spain

Executive Summary

  • Spanish dockworkers are set to stage a seven-day strike from March 10 to 24
  • International Dockworkers Council has called on European ports to strike on March 10 in solidarity
  • Low productivity and threat of strike have already led to cancellation and re-routing of vessels
  • Companies at Port of Valencia have already accumulated losses of some EUR 32.5 million
  • Possible contingency options include re-routing to other ports not affected by the strike action as well as utilizing intermodal services

Current Situatio

Following the adoption of a draft law decree on regulating dockworkers’ activities by the Spanish Congress on Friday, February 24, the Port Workers Management Companies (SAGEP) – which represent about 6000 dockworkers in Spain – have called for seven days of on-and-off strikes at Spanish ports during the period of March 10 to March 24, 2017.

Following a deadlock in negotiations since February 22, representatives of employers and different labor unions have resumed negotiations since February 28. However, latest media sources are indicating that no agreement has been reached, but that parties would meet again in the near future though no specific dates have been scheduled yet.

The dockworkers’ strike is planned over three consecutive weeks on the days of March 10, 13, 15, 17, 20, 22 and 24. The work stoppages will occur during the odd hours on each of these days. Latest media sources indicated that contrary to the initial plans there will be no strike on March 6 and 8 to allow for further negotiations.

However, it is unlikely for the Spanish government to be able to pass the draft law decree without support from the Spanish socialist party PSOE and other left-wing parties. Latest media sources confirmed that the PSOE parliamentary group will not support the draft law decree which has to be validated in Congress before March 24.

Nevertheless, the International Dockworkers Council (IDC) and International Transport Federation (ITF) have called on all European and international ports to strike on March 10 for three and one hour respectively to support the case of dockworkers in Spain. Both organizations also stated that during the strikes in Spain, the neighboring ports of Marseille- Fos, Lisbon and Tanger-Med will not be available to handle containers for import or export. In addition, Portuguese unions have called on dockworkers in Lisbon to make sure no loading activities are being executed in the port of Sines.

It is predicted that the on-and-off strike will lead to a very low productivity in Spanish ports during these days, thus restricting flow of goods and causing significant delays in cargo clearance. The situation has the potential to escalate to other European ports if no agreement is reached, hence impacting supply chain networks across Europe and beyond within the coming days and weeks.

Background: What’s at Strike

The SAGEP represents a total of 48 associations in the Spanish port system. It is said to enjoy a monopolistic position which requires domestic and foreign companies to resort to SAGEP when hiring dockworkers to handle containers. The dockworkers’ sector is currently the only one in Spain in which companies cannot hire workers directly. Some sources estimated that currently half of the cost of handling containers in Spanish ports stems from mandatory services provided by SAGEP.

As decided by the EU Court of Justice back in December 2014, the hiring process at Spanish ports is violating EU law. In order to bring relevant Spanish laws in line with EU regulations, the Spanish government has proposed a draft law decree to reform the port associations within three years. The aim of the reform is to allow companies to hire dockworkers directly and thus increase competitiveness in the sector. According to the Spanish government, it is estimated that the sector reform could result in cost reductions at ports of 30% and an increase in 0.2% in national exports.

SAGEP is demanding that a register of dockworkers be included in the draft law decree and that all workers be subrogated in the new work centers which is to replace the SAGEP, allowing them to keep their jobs.

Supply Chain Impacts

Ports in Spain are the cornerstone of the Spanish economy. Official figures indicate that 86% of imports and 60% of exports are handled via national ports. Valencia alone accounts for 38% of total cargo handling per year in Spain. By some estimates, strikes could cause financial losses of EUR 50 million per day.

Currently, low productivity rates at Spanish ports have already restricted flow of cargo, resulting in significant delays in clearing import and export containers, in particular at the ports of Valencia and Algeciras. While there are queues of several hours reported in Valencia and at TTIA terminal in Algeciras, APM terminal in Algeciras is said to be working normally. The port of Barcelona is currently also operating normally, while a slight decrease in productivity is being reported at the port of Bilbao. Low productivity and threats to strike have led to the cancellation of some vessels. The main terminal operators in Valencia have lost EUR 2.5 million per day since February 25, 2017, having been forced to divert 17 vessels (approximately 16,000 containers) to other competing terminals in Spain, Portugal and Italy. As a result, companies situated at the port of Valencia have accumulated losses of some EUR 32.5 million.

Similarly, the port of Algeciras is said to have lost 13,000 containers due to the mistrust that a strike notice generated with customers, according to Carlos Arias, APM’s director of Southern European Operations for Maersk Line. As a transshipment port, Algeciras is particularly sensitive to cargo disruption. 40% of world containers pass through the port whereas its import-export traffic only accounts for 10%, compared to 50% for Valencia.

Container shipments have also been diverted from the port of Vigo, especially to ports in Portugal. Some carriers have reported revenue losses ranging from 25-30% over the past weeks. According to APM terminals, 20% of cargo movement has so far been lost at the port of Algeciras and the scheduled strikes could potentially reduce the expected cargo movements from 2.5 million to 500,000-700,000 in 2017.

Vessel cancellations further add to the lack of capacity in import and export services to Asia and export services to the USA and Mexico, exacerbating the situation through increasing delays in regular departures of containers. For the period of the strike, high port congestion is expected in all Spanish ports. This is especially critical for goods which are perishable or need special handling such as fresh fruits, hazardous cargo or controlled temperature shipments. It is reported that in Valencia, the sectors most susceptible to the strikes are locally established industries such as chemicals, textiles, ceramics and food and agriculture. Both Valencia and Vigo are also home to important automotive manufacturing locations, which rely on imported components via their respective ports.

Potential Contingency Measures

Ahead of the planned strike, many companies have already advanced shipments of goods to avoid fines for late delivery once the strikes begin. Other companies are opting for the storage of import-export shipments in container depots at the ports of Valencia, Barcelona and Madrid.

Other companies and vessel carriers are reportedly exploring options of re-routing to other destinations and/or connect shipments via intermodal services. This will likely cause an increase in expenses due to last minute bookings for road and rail services. However, it will guarantee that cargo is exited and tight supply chains deadlines are met, according to David Sánchez, director at the International Center of Transport and External Commerce in Salamanca.

Some companies are exploring options to re-route shipments to other Spanish ports (Barcelona) and European ports in France, Italy (Gioia Tauro) or Portugal (Leixoes and Sines) via road or rail services. However, latest media sources reported that dockworkers are staging a protest at the port of Gioia Tauro on March 2. Some ships have also been called in Malta (Marsaxlokk) instead. This could prevent cargo from remaining in ships, i.e. perishable produce, or being stuck in container depots.

For vessel carriers, the alternative of re-routing would reduce the risk of incurring high costs in the event that vessels are paralyzed in Spanish ports. Danish shipping line Maersk is said to have diverted all westbound Asia – Europe and Middle East services from Algeciras to other terminals in the Mediterranean where it had already secured capacity, according to industry sources. The Danish company operates a third of the maritime movements of all Spanish ports.

There is also the possibility of resorting to transcontinental rail connection services to ship cargo to China. As of January 2017, trains depart regularly from 15 different cities across Europe, including Madrid, Rotterdam, London, Duisburg, Hamburg, Leipzig and Warsaw.

The situation remains extremely dynamic and impacts are already being felt across industries. Monitor Everstream Analytics for the latest updates on the situation in Spain.

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