As the ILWU-PMA contract negotiation standstill swiftly approaches a full year, strikes and slowdowns remain a worrying possibility especially after the recent trends of worker slowdowns. Any activity still has the possibility to result in massive backlogs, disruptions, and rate increases – which has the potential to cause significant harm to small and medium size importers.
After several months of no developments, there has recently been a spate of minor disruptions caused by the ILWU which, according to multiple media reports, were likely due to frustration over not having a contract after nearly a year of negotiations. These disruptions come at a time when container volumes continue to be depressed and the number of blank sailings continues to grow. However, industry leaders do expect imports to increase in the second half of the year, making any large-scale union action at West Coast gateways especially harmful and disruptive as the industry tries to recover from low consumer demand.
“While these labor actions are very mild, seeing them unexpectedly spring up almost a year into negotiations could foreshadow more serious issues in the near future,” said Frank Costa, Vice President of Sales for OEC Group’s New York office. “This issue has always been a sleeping giant, and it is one of the main reasons why the supply chain got out of whack in the first place. It is the major element remaining that is preventing the supply chain from fully returning to its normal state.”
The fear among many industry experts is that the disruptions may evolve into full-scale chaos right at the moment the industry begins its peak season. To put this potential impact into context, while imports may not be near the historical highs the industry saw last year, container processing statistics at domestic ports through the first and second quarters show that imports are at least matching, and in some cases eclipsing, import numbers prior to the pandemic. In other words, based on current data, any labor action will in all likelihood trigger a severe avalanche of problems for the entire supply chain.
“The potential consequences of any major West Coast labor action are the same now as they were last year, and shippers need to remain vigilant and plan their import and pricing strategies assuming that some sort of labor action will occur,” says Jason Haith, Station Manager of OEC Group’s Louisville office. “Small and medium size shippers locked into contracts with a single carrier are at particular risk because of a lack of supply chain flexibility. The only way to adequately combat any potential labor action is to partner with a company with strong industry-wide relationships who can help quickly and easily maneuver your goods throughout the supply chain by any means necessary. It’s just like the old saying goes, the more things change . . . the more they stay the same.”