In this issue of Tom’s Takes, we update our readers on the West Coast Port contract negotiations and the reduction of inbound cargo in the Ports of Long Beach and Los Angeles.
In May of 2022, I wrote about the upcoming labor negotiations between the Pacific Maritime Association (PMA) and the International Longshoreman and Warehousing Union (IWLU) regarding their contact that was set to expire on June 30, 2022. That contract provided higher wages and pension benefits to help avoid cargo congestion issues that began in 2019 and continued through the height of the pandemic.
Fast forward to May of 2023, and the PMA and IWLU still have not reached a final agreement. The parties had jointly announced agreements to health care benefits last year with pay and automation issues still on the table for nearly one year.
The Role of Automation in Port Efficiency
The White House has acted in an advisory role to the negotiating parties with their Supply Chain envoy, Stephen Lyons, supporting a move by the ports towards automation, but not at the expense of labor reductions. “Automation has to be part of the solution going forward, but it doesn’t have to be at the expense of labor,” Lyons was quoted. “Labor has to be part of the solution.”
In their 2022 report on Global Container Port Performance, the World Bank listed Los Angeles and Long Beach as the least efficient ports out of 370 global commerce hubs, supporting the need for automation investments to occur.
Decrease in Inbound Freight from Asia to LA-Based Ports
In parallel to the contract negotiations and dating back to the 2021 peak holiday season, the amount of inbound freight from Asia to the LA-based ports has decreased significantly. In October 2021, there were nearly 100 vessels waiting to be unloaded versus only 15 in March 2023. During the first three months of 2023, the ports handled 30 percent fewer twenty-foot equivalent unit containers (TEUs) than in 2022.
Tom’s Take: “Continued U.S. Inflation and high inventory levels following the COVID-19 build-ups within the domestic supply chain have led to reduced consumer demand from Asia manufacturers to the two California ports. Shippers have also been proactive in diverting cargo to east coast ports, such as Savannah or New York/New Jersey, as an insurance policy to potential labor issues at west coast ports.
With the White House acting as an intermediary to the PMA and IWLU, the potential for reaching a multi-year agreement that meets the needs of both parties is enhanced and should mitigate any future supply chain disruptions and inflationary pressures due to inventory availability.”