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Negotiations on port work are creating new complications for the supply chain

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Dockers and cargo handling companies in the West Coast are due to begin contract talks this week that have high rates for the U.S. economy, which has suffered from supply chain disruptions.

The labor talks cover about 22,400 workers at 29 ports, including major Southern California facilities, which are the nation’s busiest gates for imported goods. Such negotiations have been long and controversial in previous years, leading to major disruptions and delays in the flow of goods.

The risks were rarely as high as this year.

Negotiations between the International Union of Long-Term and Warehouses and cargo handling companies are set to begin on Tuesday, two years after supply chains fell due to the Covid-19 pandemic and led to tensions at the factory, damaging retail sales. and helped push inflation to a 40-year high.

A meeting of the parties in San Francisco is also planned American ports close the gap container shipments, and transportation rates that have reached record levels seem to be stabilizing. But shipping officials say the cargo networks remain fragile, especially because talks could heat up and tensions are only rising. a new influx of imports should hit the ports this summer at the beginning of the peak of the shipping season.

“If anything further disrupts the supply chain, it will be devastating,” said Jim McKenna, who as head of the Pacific Maritime Association will negotiate jobs on behalf of employers, including some of the world’s largest shipping lines.

ILWU International President Willie Adams wrote in an open letter Friday that the union is looking for “a contract that honors, respects and protects good jobs in the U.S. and U.S. importers and exporters.”

Importers of everything from furniture to toys and American exporters of agricultural goods and other products are preparing for the possible consequences not only because 40% of US maritime imports pass through 29 ports affected by the negotiations, but also because past negotiations have led to serious problems. serious failures.

Disagreements between management and work teams during the last two of the three contract negotiations, in 2002 and 2014caused cargo delays that cost individual manufacturers and retailers millions of dollars in lost revenue.

Dockers are expected to demand higher wages, better benefits and restrictions on the automation of cargo handling facilities. Industry and observers say the union is entering the negotiations in a stronger position than usual.

Union workers continued to work throughout the pandemic and handled record volumes of cargo. Foreign ocean carriers, which own many cargo handling facilities in ports, cannot admit poverty, making billions of dollars in profits in a market where supply continues to outpace demand. The White House, which has the power to intervene if negotiations come to a standstill, is also seen as work-friendly.

Few industry representatives expect the talks to be resolved by the time the current contract expires on July 1st. But there is optimism that an agreement could be reached by the end of the year, largely due to intense attention in the negotiations.

More from the logistics report

During preliminary labor talks, the federal government began paying close attention to the talks after they lasted for several months, industry officials said. In contrast, says Brian Osenbeck, senior analyst for transportation and logistics

JPMorgan Chase

& Co., Biden administration has been focusing on ports for over a yearissuing orders and pushing logistics firms and shippers to change operations to ease congestion.

This year’s talks are also taking place against a background unlike any other recently.

The failure of negotiations in 2014-2015 was marked by accusations of slowing down, and dozens of container vessels supported the California ports of Los Angeles and Long Beach during the dispute. This year’s talks begin with the fact that more than 30 ships are already waiting in the offshore zone due to congestion in supply chains, although this is sharply below More than 100 ships were supported in early 2022.

Over the past two years, carrier customers have become so accustomed to dealing with port congestion that many have adopted a mitigation strategy, from placing more stock to transporting goods through East Coast and Gulf coast ports. Some shippers already have use these lessons ordering earlier to school and holiday goods or transferring goods to alternative gateways.

Write Paul Berger on Paul.Berger@wsj.com

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