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US west coast braces for docker union talks as Suez Canal threat looms

EMPLOYERS and longshore union leaders are preparing to negotiate a new labour contract for US west coast against a challenging backdrop with the threat to their core business from the Suez Canal.

The new Panama Canal locks will not be completed this year after all, but there is still concern about the routing of cargo destined for the consumer-rich eastern US. What the west coast ports had not expected, though, was the threat to their business from the Suez Canal, reports Lloyd's List.

Although most Atlantic seaboard ports are not geared up to handle the biggest boxships, a number of shipping lines are operating services from Southeast Asia to the US via the Suez Canal to deploy vessels of around 8,000 TEU to 9,000 TEU displaced by the arrival of much larger tonnage in the Asia-Europe trades.

This has caught the west coast ports by surprise, according to one insider, and may have a bearing on contract negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA), which represents employers.

Although Los Angeles and Long Beach are expected to show a modest increase in combined box throughput in 2013 compared with 2012 and 2011, business has not recovered to the levels of 2007 when the two ports handled 15.7 million TEU.

Competition from ports on the other side of the country is likely to be a consideration as the ILWU and the PMA open talks in a few months' time. For the ILWU, though, healthcare benefits are expected to be the most contentious issue.

Union members have some of the best medical plans in the country, but under so-called Obamacare, they will be required to pay a new tax over a certain threshold. Some employers fear the union may press for terminal operators and shipping lines to pick up that cost. The funding of pension schemes is another issue to be resolved.

In addition, both ports are expensive for shipping lines because of costly eco mandates. When a new labour contract was being negotiated in 2002, relations between the two sides became so bad that the ports were closed for a couple of weeks until the government intervened.

The 2008 negotiations were far less acrimonious but were thought to have dragged on for too long.

This year, the plan is for one week of negotiations in the PMA's San Francisco offices and another week hosted by the ILWU, probably around the end of April or beginning of May, with the hope that the two sides will emerge with a firm agreement at the end of that fortnight without any industrial disruption.