Risk Center

Uncertain path forward as 2022 ILWU negotiations resume

Anthony Yanchuk | June 2, 2022

Despite inactivity in the contract talks between the International Longshore and Warehouse Union’s (ILWU) and Pacific Maritime Association (PMA), shippers are already reacting to the prospect of potential work stoppages or partial strikes.

Surcharges could add up

In the event of a strike action/work slowdown coupling with an import surge from Asia, the Port of Los Angeles-Long Beach may finally institute its import dwell container surcharge to alleviate backups. Ocean carriers could be charged for each import container slated to transit via truck starting at nine days of dwell time, with the fee starting at six days for cargo moved by rail – delay times that the port is already experiencing.

The fees start at $100 per container, increasing in $100 increments per container per day of additional dwell, the financial impact of the penalty would likely be passed on to customers in the form of surcharges and higher overall shipping rates.

China shipping may surge

Even though congestion issues have improved on the West Coast, it is critical to keep in mind as the lockdown in Shanghai lifts from June 1, export shipments out of the Shanghai-Ningbo container gateway are expected to significantly increase, potentially causing another surge of vessels arriving in short succession at U.S. West Coast ports.

The potential China shipping surge seems to give the ILWU a time and situational advantage, putting pressure on shippers as July 1 comes closer.

Government may intervene

Previously, the Bush Administration in 2002 blocked the PMA’s lockout of employees, albeit months after talks stalled. Similarly in 2015, President Obama sent Labor Secretary Thomas Perez to mediate talks nearly nine months after the contract expired, spurring an agreement shortly thereafter. This year the current administration may again side with workers as the labor dispute may become a keystone issue in upcoming midterm elections. The key difference is that an executive action may come sooner as officials have been present at the talks from day one. An executive intervention that keeps cargo moving while visibly supporting workers could be the likely outcome if the sides remain deadlocked in their demands, especially if the impasse continues into the fall of 2022.

Wait time trends

Wait times continue to fall across the U.S. West Coast, while creeping upward in Western Canada. Everstream Analytics’ data tracks wait times at multiple U.S. ports, shown in Figures 1 and 2.

Figure 1: Port congestion data for May 24-30; Source: Everstream Analytics.

Wait times continue to fall across the U.S. West Coast, while creeping upward in Western Canada. Everstream Analytics’ data tracks wait times at multiple U.S. ports, shown in Figures 1 and 2.

Looking at the U.S. Gulf and East Coast, new bottlenecks are appearing while others wane. The unpredictable trend of waits on the U.S. East Coast makes it difficult to plan dependable alternatives as surging pockets of congestion have occurred unpredictably on a week-to-week basis at facilities in Savannah and Norfolk.

Figure 2: Daily count of waiting cargo vessels outside major North American ports, 2022; Source: Everstream Analytics.

Recommendations

Customers should use Everstream Analytics’ real-time congestion data to prepare for a potential strike action and develop contingency plans that include less congested ports, higher inventory levels, or advanced ordering.

Companies using smaller, less congested ports in contingency plans should anticipate that shorter waiting times could quickly increase due to limited capacity, particularly as customers prepare by booking shipments further in advance. Many ports are also at risk of being disrupted during the Atlantic hurricane season which begins June 1.

Everstream customers are receiving detailed information about this disruption. 

Contact us to learn how we can give you a complete view of the risks affecting your end-to-end supply chain and what you can do to mitigate them.  

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