In September, the Los Angeles-Long Beach port complex saw rail container dwell times climb to a two-year high, averaging 9.25 days, due to record imports from Asia. This surge was partly driven by retailers redirecting cargo from the East and Gulf coasts amid ILA protest concerns.
Depending on who you ask, there is reason to believe that the contributing factor behind the 10-day plus rail dwell times has much more to do with increased volumes to the U.S. West Coast, particularly the ports of Los Angeles and Long Beach.
Vessel Bunching
Vessel bunching is an age-old problem that plagues the industry from time to time. It occurs when vessels arrive back-to-back or within a short time between each other. 2024 has seen a sharp rise in vessel bunching, reminiscent of the chaotic schedules of the COVID-19 era. This "bunching" places immense pressure on ports and terminals, leading to congestion and a ripple effect on the broader supply chain, including trucking, rail, and barge services (where applicable).
A major challenge is the lack of space at the terminals. With limited room to unload import containers, truck and rail operations need help clearing them before the next ship arrives for unloading.
Who’s to blame when it comes to vessel bunching?
Shipping lines are often scrutinized for vessel schedules, but they frequently argue that the problem doesn't lie at sea. The focus then shifts to the terminals, which say that if shipping lines could maintain consistent schedules, terminal issues wouldn’t arise. In all reality, bunching occurs due to various problems, such as weather, previous West Coast port congestion, operational delays, and unforeseen events affecting the entire shipping network.
Union Pacific Cites Communication Issues for Delays
Union Pacific (UP) reported unexpected challenges due to a surge in cargo at Southern California ports. It attributed slower rail speeds and increased idling times to insufficient advance notice of freight diversions from the East and Gulf coasts, where labor disruptions loomed. In the third quarter, UP's intermodal volume rose 19% from the previous year, with international freight spiking 33%, recalling the intense freight activity during the 2021 pandemic.
Over the past six weeks, UP’s average train speed dropped by 5.4%, while idling times for loaded railcars rose by 120% compared to last year, according to the US Surface Transportation Board. Rival railroad BNSF faced similar slowdowns and railcar backlogs. UP’s CEO, Jim Vena, noted the surge was unforeseen, with unexpected increases linked to port and labor disruptions. The surge forced UP to move intermodal equipment with less efficiency, resulting in slower-than-anticipated rail operations.
Brace for Impact? Weighing the Odds of a January ILA Port Strike
The ILA and the United States Maritime Alliance (USMX) recently said in a joint statement talks will take place in New Jersey in November on a six-year master contract. After settling on a wage offer on October 3 that would increase longshore pay by 62%, the two sides agreed to a contract extension until January 15, 2025, to negotiate other outstanding issues. The biggest remaining issue concerns contractual language around marine terminal automation and new technology use.
Boeing Strike Similarities
Supply chain experts caution that a January 16 ILA strike could echo the ongoing Boeing machinist strike, highlighting key sticking points over benefits and automation.
Boeing machinists, 33,000 strong, have held firm on demands for pension reinstatement, leading to a months-long impasse even in the face of a 35% wage hike over four years. This resolve signals the ILA’s likely approach as they insist on a complete halt to automation, a demand that union leader Harold Daggett shows no sign of compromising on.
ILA members prepared to strike just five days before the presidential inauguration, speculation grows over whether President Biden will use the Taft-Hartley Act to intervene—a move he previously avoided.
A Monopoly on Labor and a Barrier to Automation
The ILA’s power to exclude automation from its contracts with the USMX illustrates a unique, quasi-monopolistic influence on U.S. port operations, as no private sector entity can enter and fulfill these services without ILA involvement.
Unlike other industries where market competition drives efficiency and cost management, the ILA’s exclusive hold over longshore labor at East and Gulf Coast ports allows it to impose conditions—like blocking automation—that reduce efficiency and increase costs across the supply chain.
This bottleneck limits the competitive landscape, effectively stymieing potential advancements that could benefit U.S. commerce and global trade standings.
In essence, the ILA’s leverage over critical national infrastructure, paired with the inability of other entities to step in, grants the union significant control over operational standards and technological progress at U.S. ports, shaping the economic landscape much as a monopoly might.
Based on the current proposed wage increase, skeptics think neither side will budge on automation. The USMX will effectively have to buy its way into automation via a larger increase in salary, pension, royalties, or some other mechanism and agree to keep the employed union members at current levels for years.
