As West Coast union dockworkers celebrate a tentative agreement for a five-year contract featuring even higher wages and benefits than the current $1,200-per-day, shipping companies intend to introduce new mega-container-ships and port handling equipment that will help automate away many union jobs.
Turmoil with dockworkers resulting in late deliveries and rotting perishables has become a way of life over the last two decades for West Coast port operators. The regular shakedowns by members of the International Longshore and Warehouse Union explain why the world’s highest paid union employees appear to have succeeded in pushing up their average compensation and benefits.
The overall cost has been that the West Coast’s share of U.S. container traffic has fallen from over 50 percent in 2002 to 43.5 percent in 2013, according to the Pacific Maritime Association. Wal-Mart, Home Depot, Target and other retailers now expedite shipments of their Asia-sourced retail merchandise through the Panama Canal or unload their cargo at the Mexican port of Lazaro Cardenas.
After nine months of chaos and billions of dollars of losses associated with the union work slowdown, large West Coast ports had hoped to enjoy a two- to four-month backlog of cargo, since the West Coast is still the fastest route to the inland U.S.
It is unknown how many shipping companies intend to abandon West Coast ports. But Port of Portland Executive Director Bill Wyatt just announced that Hanjin Shipping Co., responsible for 80 percent of vessel calls at their container terminal, announced that the company was abandoning port operations as of March 9, due to “very low productivity.”
To reduce the number of West Coast “vessel calls”, the shippers are increasing the maximum number of containers per ship. “Mega-container-ships” have grown from being capable of carrying 8,500 20-foot-long containers in the early 2000s, to 1100 by 2010, to 1,900 today–and capacities are expected to soon reach 24,000 containers.
To try to hold onto their shrinking market share of the shipping business, U.S. West Coast ports are being forced to dredge deeper harbor channels, buy new cranes and automate multi-modal equipment to handle the mega-ships.
Jock O’Connell, Beacon Economics international trade adviser, told the San Jose Mercury News: “There are monsters out there, and unless we learn how to deal with these monsters, we’re going to lose business and tremendously affect the economies of the ports and the regions around them.”
The terminals at the ports of Los Angeles and Long Beach were built to handle smaller ships. Each of the city-owned facilities is spending $1 million or more per day getting its infrastructure ready to service the largest of the mega-ships.
“The challenge for Los Angeles and Long Beach and the terminals around the country is adjusting to this new reality, these larger ships,” said Port of Los Angeles spokesman Phillip Sanfield.
The Port of Los Angeles has averaged 4,000 vessel calls per year. But the move to mega-container-ships is being driven by big ocean carriers pooling their shipments. There are currently only two mega-ships entering the Los Angeles Harbor per week. As that number rises, vessel calls will shrink and so will the need for longshoremen.
International Longshore and Warehouse Union gained iron-fisted control of West Coast ports during the 1934 General Strike due to its ability to cause such national pain the shipping companies had to cave to their wishes. But in the Mechanization & Modernization (M&M) Agreement in 1961, ILWU longshore workers exchanged huge individual pay-outs for the shipper’s right to containerize the ports. Over the next 40 years, the union workforce shrank by 90%.
West Coast union dockworkers seem to be relishing their supposed victory. But by ILWU playing hardball, the shipping companies intend to automate more jobs away.