The workers want a raise. Shippers need robots. The supply chain depends on reaching a deal

The immediate future of the global supply chain remains at the negotiating table in San Francisco, where a union representing all West Coast dock workers is discussing a new contract with the assembled shipping bosses.

The current contract, which covers more than 22,000 workers from the International Union of Longshoremen and Warehouses in 29 US Pacific ports, expires on July 1.

At stake is the uninterrupted flow of goods into the country after two years of supply chain disruptions due to the pandemic, material shortages, soaring fuel prices and occasional giant ships getting stuck in the Suez Canal. Forty percent of all U.S. maritime imports pass through West Coast ports, with more than 30% of all containerized imports arriving at the ports of Los Angeles and Long Beach, which together make up the nation’s largest port complex.

Previous contract negotiations dragged on past the expiration date and resulted in major disruption to the port as workers and shipping companies represented at the negotiating table and on the west coast docks by the Pacific Maritime Association. an industry group campaigning for a better deal.

In 2002, negotiations deteriorated to such an extent that the PMA, representing 70 shipping carriers and terminal operators, blocked his workforce within 10 days before the administration of George W. Bush intervened. In 2014 and 2015, the Obama administration also took part to end yearlong contract fight with slowdowns and stops.

The background of the negotiations differs sharply from previous rounds. In 2002 and 2015, shipping companies faced either low profits or outright losses as a glut of new large ships drove down freight rates and shipping revenues.

But the past two years have brought financial success to maritime shipping companies, with industry-wide profits of more than $150 billion in 2021. One of the industry leaders, AP Moller-Maersk, had the most profitable year of any company. in Danish history with a profit of $18.7 billion, a trend that the shipper has maintained until 2022, with a reported profit of $6.8 billion in the first quarter alone.

At the same time, total imports from Asia to the US West Coast have increased over the years, giving ILWU workers more control over their key point in the global flow of goods. A surge in demand for imports has led to historical backup at the Los Angeles Port Complex over the past year with over 100 giant container ships offshore idle waiting for the berth at a certain time during the holiday season. That number has since dwindled to just 30 ships waiting to unload, but as labor talks unfold this summer, supply chain experts are gearing up for a new round of shipping.

Port congestion has “improved,” said Christopher S. Tang, a distinguished professor at UCLA’s Anderson School of Management who studies supply chains, but “it won’t be long because the tsunami is coming.” Peak ocean liner shipping season typically falls in August, when the school and holiday season begins, and retailers, burned by delays in previous years, are getting a head start in waiting. Combined with the backlog of ships idling in the port of Shanghai, which has been subject to strict lockdowns due to COVID-19, Tang believes another crisis is about to come.

As the supply chain and its link to inflation came into the national spotlight for the first time in decades, both sides of the table began negotiations with restrainedly positive rhetoric in pre-negotiation statements, and a mutually agreed-upon media blackout began.

ILWU President Willie Adams wrote that “the men and women of ILWU look forward to meeting employers and forging a contract that respects, honors, and protects good jobs in America and American importers and exporters.” in open letter published in early May. This was stated by PMA Executive Director James McKenna. video statement that the organization is committed to a smooth new contract.

Politicians have already spoken out, urging both sides to an agreement. Adams was called to a meeting at the White House last October to discuss the supply chain with President Biden, Vice President Kamala Harris and Transportation Secretary Pete Buttigieg, among others, and in November he was joined by the California governor on a tour of the port complex. Gavin Newsom and Biden administration port envoy John Porcari. In May, when negotiations began, Sept. Dianne Feinstein from California posted letter to Adams and McKenna asking them to reach an agreement quickly, noting that any slowdowns or shutdowns “would exacerbate disruptions to the global supply chain.”

If negotiations become more heated, the Biden administration has also signaled that it will intervene. “We don’t need to interfere in these negotiations if it’s not necessary,” Labor Secretary Marty Walsh said in a May interview with Bloomberg.

The potential for conflict is clear. PMA CEO McKenna highlighted the fact that ILWU workers receive a “world-class salary” that averages close to $195,000 a year for full-time workers, plus benefits, and said the PMA is committed to promoting automation in ports.

ILWU President Adams denied both points in his open letter. “We make no apologies for having achieved a wage that allows workers to provide for their families, retire and receive the health care that is required for this challenging and dangerous job,” Adams wrote, noting that “decades of previous negotiations have made port jobs are good jobs. …”

On the issue of automation, Adams was more assertive, writing that “automation is not only killing good jobs, it’s not moving more cargo” and is a national security risk as infrastructure hacks become more common.

After two years of fighting the pandemic, when shippers made record profits, historically well organized and powerful According to Jake Wilson, a professor of sociology at California State University, Long Beach, ILWU is likely looking for a raise to fight inflation, who has written several books about ILWU and global logistics.

“When you look at the value added and the importance of the work that dockers do, it’s only a small percentage of the total high-yield system for these large corporations,” Wilson said.

West Coast dock workers are the highest paid logistics workers in the United States, but Wilson noted that “these jobs are still on the decline – workers on the docks haven’t been promoted in years, there’s constant pressure to work longer hours and work more.” to end”. night and other demands that would require the hiring of more unionized dock workers.”

The numbers support Wilson’s argument. In 2021, the PMA paid out $2.26 billion in wages and another $1.55 billion in benefits, according to the annual report. The shipping industry made $150 billion in profits.

A 10% increase across the board for West Coast longshoremen would raise labor costs on the West Coast from $3.8 billion to about $4.2 billion. This $400 million increase is just over a quarter of the industry’s 1% earnings last year. The estimated cost of a 10-day work break in 2002 was in the billions to the US economy. Ten days of lost profits out of $150 billion a year would add up to more than $4 billion for shipping companies alone.

“What is truly unique about port workers around the world is their strategic location in the world’s most chokepoints. Working in ports is a great opportunity,” Wilson said. “The money is there, shippers are accumulating huge amounts of profits, and most people are not.”