INSIGHT: West Coast US port, dockworkers to miss deadline for labour contract

HOUSTON (ICIS)–Ports and dockworkers on the western coast of the US said they will miss a 1 July deadline to sign a labour agreement, leaving chemical companies at risk for more supply chain problems.

• Ports, workers will maintain operations as talks continue.
• Both sides say they are committed to reaching deal.
• Port disruptions characterised past talks.

The Pacific Maritime Association (PMA) will negotiate on behalf of shippers, and the International Longshore & Warehouse Union (ILWU) will represent dockworkers. The union represents 22,000 workers at 29 western coast ports from Bellingham, Washington, to San Diego, California.

The two sides acknowledged that they are unlikely to reach an agreement before the current labour contract expires on 1 July. In a joint statement, both groups said they are not preparing for a strike or lockdown. They stressed their commitment to reaching  an agreement.

Still, the concern is that talks could break down. Past contract negotiations have been contentious and included disruptions at ports.

Previous labour disputes at the ports have cost the US economy $1bn-2bn/day, according to a letter to the US president’s office from the American Chemistry Council (ACC) and several other trade groups.

This time, the cost could be higher because supply chains are already strained.

“Even a relatively short port slowdown or shutdown could compound inflationary pressure and cause long-lasting damage to consumer confidence and American businesses,” the letter said.

The two sides have provisions in place that allow them to continue operations while negotiations continue, said Eric Byer, president of the National Association of Chemical Distributors (NACD).

CONSEQUENCES OF DISRUPTIONS
US chemical companies rely on western coast ports to receive imports of specialty chemicals.

The San Pedro Bay complex, made up of the ports of Los Angeles and Long Beach, accounts for 25% of US exports and 40% of containerised imports, according to Freightwaves, a trade publication.

For a lot of small businesses, San Pedro is the prime location for their products to arrive, Byer said.

Either the ports or the dockworkers could disrupt port operations.

Dockworkers could purposely work slowly or call a strike. Ports could lock out dockworkers, which would prevent them from doing their jobs at the ports.

The consequences of such disruptions would trickle down through the supply chains and cause knock-on effects.

Work disruptions could worsen the pile-up of containers at western coast ports, said Scott Jensen, ACC spokesman.

Chemical companies could divert shipments through the Panama Canal and to ports along the Gulf Coast and the eastern coast.

Ideally, Byer said shipments would arrive at ports in Houston or New Orleans, Louisiana, home to the nation’s petrochemical and refining hubs.

However, both are vulnerable to restrictions and shutdowns caused by tropical weather. Hurricane season started on 1 June, and meteorologists are predicting an active season.

Also many ports are already stretched and may have little spare capacity, said Scott Jensen, a spokesman with the ACC.

Companies may have to ship their products farther away to ports in Miami, Florida and up the East Coast – to Savannah, Georgia; Charleston, South Carolina; Morehead City, North Carolina; or even the mid-Atlantic, Byer said. These more distant destinations will add weeks to delivery times.

Trucks and rail can only do so much to address any problems caused by port disruptions.

Trucking has struggled with a chronic shortage of drivers, a problem made worse by the coronavirus. Railroads have had acute service problems.

Earlier in April, the railroad companies Union Pacific (UP) and BNSF asked their customers to reduce volumes over the coming days

The restrictions led INEOS Olefins and Polymers USA to declare a force majeure on polymer products.

THINGS ARE ALREADY BAD
Supply chains already have many problems.

Delivery times for containers from the Pacific Northwest to Chicago are now 90 days interior point intermodal (IPI), said Lynn Stacy, managing director of the bulk liquid division of the logistics firm OEC Group.

Before the pandemic, it used to take two to three weeks, Stacy said.

Because it is taking so long for containers to reach Chicago by rail, ocean carriers are now terminating the boxes at the port of discharge, leaving it up to the receivers to figure out how to get them to their next destinations, Stacy said.

In addition, companies are having a hard time finding chassis, isotanks and containers, all of which are critical equipment for keeping supply chains humming, Stacy said. For chassis, it is taking three times as long to obtain one as before the coronavirus pandemic.

Much of this critical equipment is manufactured in China, where there are 18-month lead times to build new ones, he said.

The ACC highlighted the problems and delays faced by chemical companies in a survey it conducted in March, which was a follow-up to one it did in November and December. The findings include the following:

• Port delays last 4-6 weeks.
• Shipments on inland waterways take an average of six days longer.
• Because of rail rates and service problems, 75% of companies switched to truck deliveries.
• Nearly all companies are paying higher truck rates and 63% have longer transit times.

The ACC and the other trade groups did point to some long-standing problems that a new labour contract could address.

Their letter noted that the World Bank’s 2020 Global Container Port Productivity Index included only four US ports in the top 100. None ranked in the top 50.

The two sides could take some steps that could upgrade port infrastructure, adopt automation and prepare skilled workers for advanced jobs, the letter said.

These steps could improve operations and US ports and help them move up the World Bank’s ranking.

By Al Greenwood

Thumbnail shows containers. Image by Shutterstock.