Potential Strike by Largest Union of Maritime Workers in North America Raises Logistics Concerns
The largest maritime union in North America, the ILA, may strike, impacting ocean freight rates. The ILA's master contract expires in September, and local contracts must be agreed by May 17. Cargo is moving back to the West Coast due to potential labor disruptions on the East Coast and Gulf Coast.
The potential for a strike by the largest union of maritime workers in North America, the International Longshoremen's Association (ILA), is causing growing concerns among logistics decision-makers and advisors due to a myriad of ongoing trade uncertainties.
Impact on Ocean Freight Rates
The Red Sea diversions and Panama Canal drought restrictions are already influencing ocean freight rate negotiations. As a result, cargo containers once destined for the East Coast are now being redirected back to the West Coast to mitigate potential service disruptions. This marks a reversal of the trend observed in 2022 and 2023, when East Coast ports experienced significant gains in cargo volume due to vessel congestion and labor issues on the West Coast.
Contract Negotiations and Deadlines
U.S. importers are currently engaging in contract negotiations with ocean carriers, aiming to secure favorable one-year rates between March and April. The ILA's master contract with the United States Maritime Alliance, which represents terminal operators and ocean carriers, is set to expire on September 31. However, the union has set a deadline of May 17 for the local contracts to be finalized before negotiating an overall master contract. Notably, all East Coast and Gulf Coast cargo is handled by the ILA, which has not gone on strike since 1977.
Labor Compensation and Demands
The current ILA contract provides union members with a range of hourly wages, including additional compensation based on tonnage processed. The ILA is reportedly seeking a larger increase than the 32% secured by the ILWU in its recent six-year contract. ILA President Harold Daggett aims to obtain a substantial economic deal, opposing port automation and advocating for exclusive port contracts for union members.
Shift in Cargo Movement
Ongoing Panama Canal restrictions, Red Sea diversions, and the looming strike threat have prompted a significant shift in cargo movement away from the East Coast. This trend has led to an increase in freight volume moving on the rails, benefiting Union Pacific and BNSF. As a result, the Port of Long Beach anticipates exceeding its pre-Covid 2019 container volume.
Preparations and Mitigation Strategies
Industry experts are advising East Coast freight customers to consider bringing in containers for peak shipping season earlier than usual, as a proactive measure to mitigate potential disruptions. Additionally, companies are exploring diverse supply chain options and considering alternative routing to the West Coast in anticipation of potential labor disputes.
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