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Tuesday, May 10, 2016
After more than a decade of West Coast disruptions, shippers are wising up
By Michael Hansen @ 2:34 PM :: 4874 Views :: Jones Act, Labor

by Michael Hansen, Hawaii Shippers Council, May 9, 2016

The Journal of Commerce (JOC) published on May 7, 2016, a news article, “After more than a decade of West Coast disruptions, shippers are wising up.” The article reports that after the West Coast Port Shutdown, which took place from October 31, 2014 through February 21, 2016 (with backlog not cleared until August 2015), shippers (i.e., merchant cargo owners) are routing more cargo through U.S. Gulf and East Coast ports.

This is a natural reaction to the three slowdowns and outright shutdowns that occurred in 2003, 2008 and 2014/2015 and the unpredictability of the waterfront union at U.S. West Coast ports, Hawaii and Alaska, the International Longshore & Warehouse Union (ILWU).

In contrast, the waterfront union on the U.S. East and Gulf Coasts, the Great Lakes and Puerto Rico, the International Longshore Association (ILA), has not used disruption as a negotiating tactic for more than couple decades resulting in a more stable operating environment and attracting cargo from the U.S. West Coast.

Key excerpts:

The reaction of shippers to West Coast longshore labor disruption is evolving in such a way that West Coast ports have reason for concern.

In 2002, a 10-day shutdown of West Coast ports amid longshore labor contract talks came as a complete surprise to many shippers.

When the next round of contract talks took place in 2008, shippers began to wise up. The International Longshore and Warehouse Union struck along the entire West Coast on May 1 of that year and after a brief lull, subsequent disruption broke out in July and spread up and down the coast before a tentative agreement was reached in late July. For many shippers, that was all the information they needed, and the exodus began.

As the expiration of that six-year contract approached on July 1, 2014, many shippers were prepared, or at least they thought they were. Plenty of cargo was diverted to the East and Gulf coasts in the run-up to the contract expiration . . . . .

During the period from July 2015, by which point the West Coast had more or less returned to normal, to March 2016, the latest month for which import data is available, one would have expected at least some of the diverted cargo to shift back to the West Coast, that is, if those diversions were temporary.

But that isn’t what’s happening. During that period, the East Coast saw imports from Asia grow at a significantly higher rate than the West Coast, showing the East Coast continuing to gain market share in the aftermath of the 2014 to 2015 labor disruptions

After three go-rounds spanning more than a decade involving West Coast labor disruption tied to contract negotiations — and none on the East Coast — shippers have smartened up. Only one action (in my view) will positively alter their perception of the West Coast. That will be for the ILWU to renounce disruption as a tool of negotiation. No more slowdowns by locals if they don’t like what they hear coming out of the negotiations.

Their counterparts on the East Coast have all but done this and are vocal in pointing out this fact to shippers. Until the ILWU takes this action, they will see a lot less business than they otherwise would.

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