This week, the Pacific Maritime Association (PMA) voted overwhelmingly in favor of a new labor contract with dockworkers. And Friday, representatives from the International Longshore and Warehouse Union (ILWU) agreed to ratify the new agreement, officially ending what has turned into an 11-month-long disagreement. The final provisions of the contract, reached in February of this year, improved the arbitration process and streamlined healthcare benefits for effected workers. Conditions of the contract will be retroactive to July 1, 2014, and continue through June 30, 2019.
Extended contract negotiations between the PMA and the ILWU became aggressive in late 2014, leading to disruptions in maritime commerce for 29 major West Coast ports that together see roughly $1 trillion worth of goods each year. The conflict has directly resulted in a shift away from Western ports in favor of cheaper alternatives in the past few months. According to The Journal of Commerce, in April alone, activity at East and Gulf Coast ports grew 12% and 20%, respectively, while West Coast port activity declined 4%. Resolution between the PMA and ILWU will help bring West Coast ports back to full capacity in the years to 2019 and drive some lost shipping demand back to Western ports.
Nevertheless, West Coast ports have consistently experienced systematic operational disruptions during years when labor agreements are negotiated (e.g. 2002, 2008, and now 2014), so some exporters and importers may seek alternative shipping routes to avoid supply chain disruption when this contract inevitably expires in 2019. In the meantime, companies that rely on goods imported to the West Coast will see shipping costs drop and inventories rise in the coming months, likely decreasing demand for alternative shipping methods, such as air cargo transportation services, national trucking services and local freight trucking services, and softening the price of imported goods in the Western region.
