Currently we wait for new updates on the USWC Labor Port negotiations. At this stage, we are still in a holding pattern for more news from ILWU and PMA, who have been silent. We are also facing growing global port congestion and a massive increase in blank sailings. Please see the articles below, and let your BOC Representative know if you have any questions.
Boxport Congestion Spreads Across The Globe Again
‘We are at the beginning of the peak season and the global fleet is already lacking more capacity, than was the case at the same point in time in 2021’
Excerpted from Splash247.com – Sam Chambers, July 4, 2022
Boxport congestion is growing across multiple continents. Clarkson’s containership port congestion index shows that as of last Thursday 36.2% of the global fleet was at port, up from 31.5% in the pre-pandemic years from 2016 to 2019, with Clarksons observing in its latest weekly report that congestion on the US east coast has recently risen to near record levels.
“Ongoing disruption caused by port congestion remains extremely supportive to the charter market, despite trade volumes in 2022 so far having come under pressure from a combination of factors,” Clarksons noted.
An operational update from German carrier Hapag-Lloyd, issued on Friday, highlighted the myriad congestion issues facing carriers and shippers around the world.
Across key Chinese ports such as Ningbo, Shenzhen and Hong Kong terminals are under pressure with yard and berth congestion thanks to ongoing covid measures and the typhoon season.
At other key Asian ports, yard density is reported hitting 80% in Singapore, and is higher still, at 85%, at South Korea’s top port, Busan.
In Europe, the start of summer holidays, rounds of strikes, growing covid cases, and bunching of vessels coming from Asia have all transpired to create congestion at many ports, including Antwerp, Hamburg, Le Havre and Rotterdam.
In Latin America, ongoing nationwide protests have hampered port operations in Ecuador, while further north, a cyber-attack, which took out Costa Rica’s customs systems two months ago, is still causing trouble, while Mexico is one of the worst hit by the port congestion contagion with a number of ports reported to be suffering yard density of 90% leading to severe delays.
Reports of delays at North America’s terminals have dominated shipping headlines throughout the pandemic and remain a cause for concern going into July with Hapag-Lloyd noting waiting times for berths are running upwards of 19 days at New York/New Jersey, while the queue off Savannah is approaching record levels with waiting times there in the region of seven to 10 days.
On the west coast, while the spotlight is off Los Angeles and Long Beach for once, Oakland is suffering, with the German carrier warning ships can wait from anywhere between seven to 27 days for a space to open up at Oakland International Container Terminal.
In Canada, the situation is dire on the west coast thanks largely to limited rail availability with Vancouver facing “significant delays” according to Hapag-Lloyd, and yard density hitting 90%. At Prince Rupert, meanwhile, the yard is heavily utilized at 113%, and average rail dwell presently stands at 17 days. The increased dwell is due to lack of available railcars.
AIS ship tracking data analyzed by British consultants Drewry has revealed that the number of containerships waiting outside of major ports is indeed growing.
“With no changes to our expected supply chain recovery timeline the market will continue to be denied capacity that it otherwise would have had access to,” Drewry stated in a recent report, adding: “We estimate that effective containership capacity will be about 15% below potential this year, following on from a 17% reduction last year.”
The level of capacity removed from the market in May 2022 is still higher than in 2020 and 2021.
“This means we are at the beginning of the peak season and the global fleet is already lacking more capacity, than was the case at the same point in time in 2021,” Sea-Intelligence warned.
Port Congestion Impacts Continue with Blank Sailings in June
Excerpted from Clearfreight.com
If we needed any more proof that the world has yet to return to a state of normalcy, it’s been given to us in the form of further blank sailings announcements. The reason cited for these planned blank sailings is the continued congestion of North American ports and the resulting schedule delays.
Congested Ports Still Plaguing North American Trade
Since the height of the COVID-19 pandemic, North American ports have been overwhelmed with traffic and inundated with congestion issues due to a variety of factors. Chief among those factors are blank sailings and increased demand for empty containers leaving US ports bound for Asian countries. A premium is being placed on empty containers to the point that US exports are being delayed in favor of sending back the more profitable empty containers over those filled with trade goods.
While the West Coast was hit particularly hard by port congestion at the onset, shippers diverting to East Coast ports has resulted in those ports becoming congested as well. Case in point, the Port of Charleston has struggled under the weight of a record number of containers having arrived in the first quarter of this year, leading to it being named the world’s most congested port by major logistics companies.
Charleston is far from the only US port that finds itself in the top 10 most congested ports around the globe currently. The ports of Oakland, Long Beach, Los Angeles, Houston, and New York all find themselves among the company of ports with the current longest import container dwell times. The primary metric used for assessing port delays and congestion, dwell time is defined as how long it takes for cargo to leave the port premises after its arrival.
Major Carriers’ Blank Sailings Announcements for June
According to Drewry’s Cancelled Sailings Tracker, 74 of the 741 scheduled sailings for the month of June have been canceled. Twenty- six of these cancellations were announced by 2M Alliance, while 22 and 14 cancellations were announced by THE Alliance and Ocean Alliance, respectively.
The ongoing congestion issues in North American ports have gone on so long that major ocean carriers are making plans based on the expectation that the congestion will remain a factor. In light of this, a significant number of scheduled port calls have been and will continue to be canceled.
More Supply-Chain Disruptions Are Coming
West Coast ports are negotiating a new labor contract, and it’s likely to cause major slowdowns, which could worsen inflation.
Excerpted from WSJ.com, by Peter Tirschwell
Things look as if they’re almost back to normal at the West Coast ports at the heart of the great supply-chain disruption that began rolling across the U.S. last year. But a new wave of disruption might soon come crashing down. While the ill effects of Covid have dissipated, the ports’ increasing need for automation to stay competitive has sharpened the labor strife that has long afflicted them.
On Friday the collective-bargaining agreement covering longshore labor along the West Coast expires, and with it the contract’s “no strike” clause. This will allow 22,400 dockworkers to walk off the job at any time until a new contract is ratified. Negotiations began in May and could take months. A strike would shut down 29 ports, including the adjacent Los Angeles and Long Beach complex, which handles 47% of containerized imports from China and other Asian manufacturing centers.
The threat of disruption is serious enough that earlier this month President Biden did what no previous president has done. He met personally with the heads of the International Longshore and Warehouse Union and of their management counterpart, Pacific Maritime Association, in the middle of their negotiations. The reason was clear. What’s at stake for the economy, and for Mr. Biden, is new supply disruptions that would further fuel inflation and boost Republicans in November.
An actual strike isn’t probable. More than half a century has passed since the last dockworker strike on the West Coast. Much more likely are local labor disruptions. There was no strike at West Coast ports in 2014 and 2015, when the contract was last up for negotiation (it was extended in 2019). But there were nearly six months of labor disruption, leading to billions of dollars in losses for agricultural exporters. Local units of the ILWU disrupted individual ports over local grievances they felt weren’t being addressed in the negotiations. Port employees’ main tactic—which they’ve employed since the 1990s—was to work “to the letter of the contract,” loading and moving containers very slowly. It’s not possible to stop a dockworker from driving equipment at a snail’s pace, and it can severely disrupt cargo flow.
It’s the possibility of this sort of protest that most worries officials. The ILWU and PMA said in a June 14 update on negotiations that “neither party is preparing for a strike or lockout.” But they made no mention of slow-rolling tasks.
Because such disruptions originate at a local level, it’s hard for the union’s leadership to maintain control. ILWU President Willie Adams pledged his support for a disruption-free negotiation when he and PMA President Jim McKenna met with Mr. Biden, but Mr. Adams may prove powerless to stop unrest from smaller units within his own union. Small organizations of workers don’t necessarily care that the White House and businesses across the world will be watching these negotiations carefully, fearing heightened inflation and shipment disruptions.
These local issues could exacerbate tensions over the big coastwide problem on the table: port operators’ desire to automate cargo handling. Since it is nearly impossible to get approval to expand the footprint of the Los Angeles-Long Beach ports, the only way they can grow is by “densifying”—moving more containers through the existing facilities. That requires robotic shuffling of the container stacks, which the union—which agreed to allow automation in an earlier contract—sees as an existential threat. But the West Coast ports risk becoming uncompetitive if they don’t automate. Other ports have done so and it’s one of the reasons some of the notable West Coast facilities are at the bottom of global port-productivity rankings.
Importers and retailers, fearing disruptions, are already pre-emptively diverting significant volumes of Asian-produced goods to ports on the East and Gulf coasts. That tactic helped unclog the backups that all but crippled the Southern California ports for much of last year and into this year. As of June 24 there were only 16 ships waiting for a berth, down from a record 109 in early January. But the diversions simultaneously led to worsening backups at East and Gulf coast ports, which were already struggling amid a deluge of arriving inventory. And worried retailers are stockpiling goods, including for the holiday season, increasing container flows and creating backups extending into the interior U.S.
Management and union leaders may offer reassurances, but be prepared for turbulent supply chains this summer.
Mr. Tirschwell is vice president of maritime, trade and supply chain at S&P Global Market Intelligence and chairman of the TPM conference.
No Deal in West Coast Port Labor Negotiations as Deadline Passes
Excerpted from GCaptain.com, by Mike Schuler
Negotiations for a new labor contract for more than 22,000 dockworkers at U.S. West Coast ports have failed to reach a new agreement by today’s deadline, as both sides promise to keep cargo moving until the two sides can reach a deal.
The latest coast-wide labor agreement expired Friday at 5 p.m. Pacific Time.
The International Longshore and Warehouse Union (ILWU) and employers represented by the Pacific Maritime Association (PMA), which includes port terminals and shipping lines, have been negotiating a new labor deal since May 10.
A deal by today’s deadline wasn’t exactly expected, with both sides saying for weeks that neither is planning a strike or lockout if a deal couldn’t reached by the deadline. Although neither side provides updates during the negotiations, port automation was said to be one of the big issues heading in.
“While there will be no contract extension, cargo will keep moving, and normal operations will continue at the ports until an agreement can be reached,” the two sides reiterated in a joint statement Friday.
The labor negotiations are taking place as key West Coast ports continue to grapple with congestion and an increasing amount of aging cargo on docks as summer and peak shipping season loom large. On Friday the ports of Los Angeles and Long Beach, which handle approximately 40% of inbound containerized cargo coming into the U.S., once again postponed implementing the Container Dwell Fee reporting only 27% decline in the amount of aging cargo compared to late October when the program was first announced, approximately back to where congestion was back in November.
The labor negotiations are being closely monitored by countless stakeholders across industries and government, including by the White House which has made combatting inflation its top priority. Global port congestion excacerbated by the pandemic has been perhaps the biggest driver of high container shipping freight rates that have raised prices for consumers.
In its quarterly container market update published this week, shipping researcher Drewry said port congestion is continuing to prevent the container shipping market from returning to normal and listed U.S. west coast port labor negotiations as one of the biggest wildcards facing the industry.
The last time the two sides met at the negotiating table, talks dragged on for months and turned pretty ugly with each side blaming the other for cargo disruptions and failure to reach a deal. With even greater stakes this time around, everyone’s hoping there won’t be a repeat.
Key US Ports Brace for Expiration of Dockworker Union Contract
Excerpted from Bloomberg.com, by Augusta Saraiva
A labor contract for 22,000 US West Coast dockworkers is on the verge of expiring, opening the door to strikes, lockouts or work stoppages—but both sides still appear willing to avoid such disruptions amid the busiest season of the year for shipping.
The International Longshore and Warehouse Union and the more than 70 employees represented by the Pacific Maritime Association started May 10 negotiating a fresh contract for longshoremen across 29 ports in California, Oregon and Washington. While the current agreement ends Friday, July 1, the groups have recently said they’re unlikely to reach a deal before then and reaffirmed neither side is preparing for a strike or lockout.
The ports handle just under half of the containers entering and leaving the US and are the principal gateway for shipments to and from China, the biggest source of American merchandise imports—illustrating the high-stakes nature of the negotiations.
Last November, the ILWU declined an offer by the PMA to extend the current contract until July 2023. The current pact was originally set to end in 2019, but was lengthened after roughly two-thirds of union members voted to do so in exchange for higher wages and pensions.
Now, one possible option is that both parties agree on a short-term contract extension to preserve the current deal’s no-stoppage clause as negotiations continue. At the Port of Los Angeles, Executive Director Gene Seroka isn’t expecting a strike.
“Anything’s possible but it will not happen,” Seroka said on Bloomberg Television. The port is giving the union and employers “as much room as they need to negotiate and the rest of us are just moving all this cargo through the nation’s largest gateway.”
Talks often go beyond the expiration date, and the parties’ commitments to keep cargo moving could avoid a repeat of the delays and congestion that hampered ports previously.
This time around, the negotiations are drawing attention because the nation’s largest trade hubs —the ports of Los Angeles and Long Beach—are struggling to clear pandemic-era congestion.
The economic stakes are high: July and August are typically busy months for imports from Asia as retailers stock up on back-to-school and holiday goods. The peak has arrived even earlier this year, with companies looking to pre-empt future disruptions by ordering these products even further ahead of time.
Additional transportation snarls would only add to the inflationary pressures that have helped pull down President Joe Biden’s approval ratings.
They will also test how far a major union will apply its bargaining leverage during an economic slowdown, given the country is facing a moment of unusual clout for its long-declining labor movement.
Anticipating problems, some shipping companies have rerouted services to ports on the East Coast, resulting in longer queues from Savannah to New York, according to a recent tally from Hapag-Lloyd AG, Germany’s largest container line.
The hardships of laboring through the Covid-19 pandemic, employers’ recent robust profits, and the rapid acceleration in inflation could all drive up ILWU members’ expectations for winning substantial raises.
The focus on mitigating supply-chain disruptions and the near impossibility of running the ports smoothly without these workers could embolden them to seek bigger concessions.
Several scenarios are possible, said Julie Gerdeman, chief executive officer of supply-chain risk analytics firm Everstream Analytics. Instead of a full strike, ports would most likely see a slowdown in loading and offloading operations, similar to 2014.
“This would slow down West Coast port operations at a time when we will likely see an uptick in imports from Asia,” Gerdeman said. Widespread Issues
Labor impasses are contributing to supply-chain disruptions worldwide. Korean industries have faced production woes due to a weeklong trucker union strike in June. Protests have also emerged in Germany, the UK and Argentina.
Meanwhile in the US, major railroads are also struggling on the labor front, as two years of unsuccessful negotiations could force the White House to intervene and prevent a strike.
If there are difficulties at West Coast ports, Biden could be forced to invoke the Taft-Hartley Act, a Cold War-era law that allows the government to call for an 80-day cool-down period amid labor impasses.
Then-President George W. Bush relied on the legislation to reopen the ports in 2002, after the PMA locked out workers for 10 days following a series of work slowdowns. When the ILWU carried out the longest strike in US longshore history for 130 days in 1972, Richard Nixon did the same.
“The administration has been watching this very closely ever since they came into office,” Seroka said, adding Biden’s June meeting with the negotiating parties was likely the first by a sitting president during contract talks.
