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"Catastrophic Shutdown Of America's Supply Chain Looms" As West Coast Port Worker Talks Break Down

Tyler Durden's picture




 

For those who have been following the recent ISM reports, one of the recurring concerns of respondents in both the manufacturing and service sector has been the congestion at West Coast Ports - which handled 43.5% of containerized cargo in the U.S and where transiting cargo accounted for 12.5% of US GDP - as a result of reduced work output by the local unions who have been more focused in recent weeks on ongoing wage hike negotiations.

And according to the latest update from the 29 west coast ports that serve as the entry point of the bulk of Asia/Pac trade into and out of the US, things are about to get far worse for America's manufacturing base, because as RILA reported earlier, talks between the Pacific Maritime Association (PMA) representing port management, and the International Longshore and Warehouse Union (ILWU) officially broke down on Wednesday, and without an agreement, experts have suggested that nearly 30 west coast ports could be shut down within a week.

As RILA reports, "a work slowdown during contract negotiations over the past seven months has already created logistic nightmares for American exporters, manufacturers and retailers dependent on an efficient supply chain. A complete shutdown would be catastrophic, with hundreds of thousands of jobs at risk if America’s supply chain grinds to a halt."

More:

"A west coast port shutdown would be an economic disaster," said Kelly Kolb, vice president of government affairs for the Retail Industry Leaders Association. “A shutdown would not only impact the hundreds of thousands of jobs working directly in America’s transportation supply chain, but the reality is the entire economy would be impacted as exports sit on docks and imports sit in the harbor waiting for manufacturers to build products and retailers to stock shelves. 

 

“The slowdown is already making life difficult, but a shutdown could derail the economy completely,” said Kolb. “For retailers specifically, a shutdown will have dire consequences for those dependent on spring inventory demand.”

 

The last prolonged port shutdown of the West Coast ports was the 10-day lockout in 2002 which was estimated to cost the U.S. economy close to $1 billion a day.

 

“A port shutdown of even a short duration could derail economic growth and cause long-lasting damage and job losses across the country,” said Kolb. “There needs to be a greater sense of urgency at the White House, before it’s too late.”

One can see why the US retail association is concerned. So will there be a strike? Here is Bloomberg's take:

Union-led work slowdowns could halt the 29 U.S. West Coast ports in five to 10 days, the head of the shippers’ association said, urging the union to accept a new offer that includes 3 percent raises. James McKenna, the president of the Pacific Maritime Association, said backups and delays at many of the ports are harming farmers, manufacturers and consumers as the flow of goods approaches a “coast-wide meltdown.” He called on the International Longshore and Warehouse Union to accept management’s second formal contract proposal since negotiations began last May.

 

“We’re not considering a lockout,” McKenna said on a conference call with reporters, his first public comments since the talks began. “What I’m really saying is that this system will bring it to a stop. Once that happens, we really don’t have a choice.”

Which is like the ECB saying "we don't really want Greece out, but we will halt their liquidity. Once that happens, Greece doesn't really have a choice."

Here are the port workers' demands:

The association of shipping lines, terminal operators and stevedores made public details of its contract offer, including 3 percent annual raises over five years, retaining employer-paid health care, and raising pensions by 11 percent. The average dockworker now makes $147,000 a year in salary, plus $35,000 a year in employer-paid health care and an annual pension of $80,000, according to an association press release.

And while there hasn't been a formal lock out yet, the reality is that the workers have made their displeasure felt loud and clear:

McKenna blamed the union for work slowdowns that have contributed to congestion at the largest West Coast ports, including Los Angeles, Long Beach, Oakland, Seattle and Tacoma. Twenty-two ships were queued up Wednesday at the harbor shared by the Los Angeles and Long Beach ports, up from as few as four in mid-December, according to the Marine Exchange of Southern California, in one measure of the backups confronting shippers.

 

Since early November, the longshore union has been dispatching fewer crane operators in Los Angeles and Long Beach and slowing cargo movement in Oakland, Seattle and Tacoma, according to a Feb. 3 maritime association presentation. McKenna said productivity at many ports is down by as much as half, suggesting that cargo movement “will collapse under its own weight.”

Some of the impacts of the already experienced slowdown has included keeping U.S.-raised Christmas trees from reaching consumers in Asia, depriving McDonald’s customers in Japan of french fries, and stranded shipments of Mardi Gras beads bound for New Orleans.

Should talks fall apart, it probably will not be the end of the world: a nearly identical situation developed one decade ago leading to a 10 day lock down and which ended up costing the US economy $10 billion per day:

In the conference call, McKenna said the two sides remain at odds over wages, pensions, the duration of the contract and arbitration for workplace disputes. He said the sides are “far apart” on some issues and nearing agreement on others.

 

The parties negotiated many of the same issues in 2002 before the maritime association locked out workers for 10 days amid slowdowns. That stoppage, which ended when then-President George W. Bush invoked the Taft-Hartley Act, cost the U.S. economy $1 billion a day, the maritime association said.

 

A 20-day lockout now would cost more than $2 billion a day, the association said in a report last year, including losses to railroads, ocean carriers and the broader economy.

Which incidentally, in an economy that is desperate for any "one-time, non-recurring" item to explain what is now global secular stagnation and economic slowdown, an excuse such as a port strike, or a harsh winter, or a strong dollar, or plunging crude, may be precisely the scapegoat that the central-planning doctor ordered.

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Thu, 02/05/2015 - 15:28 | 5748547 Hohum
Hohum's picture

Perfect!  A wonderful excuse for any upcoming recession!

Thu, 02/05/2015 - 15:29 | 5748549 Groundhog Day
Groundhog Day's picture

That right their should be good for another 75 spx points next week

Thu, 02/05/2015 - 15:41 | 5748616 quintago
quintago's picture

Idiots. Port workers should have dragged this out until about October right before the holiday. They must have missed the advertisement for Karrass school of negotiating while on a plane

Thu, 02/05/2015 - 15:45 | 5748639 I MISS KUDLOW
I MISS KUDLOW's picture

i was at a local kmart for the first time in years last weekend, looked like a middle east flea market,,,,,,didnt have what my daughter needed, the hyperinflation wwill be the cleaner

Thu, 02/05/2015 - 15:50 | 5748665 TruthInSunshine
TruthInSunshine's picture

Bullish for stocks whether it gets resolved OR not!

Thu, 02/05/2015 - 15:53 | 5748676 ZerOhead
ZerOhead's picture

When the cops conduct a 6 month $10 million investigation and discover that the port workers are making $147,000 a year and get $80,000 a year pensions there is going to be trouble...

Thu, 02/05/2015 - 16:04 | 5748725 macholatte
macholatte's picture

 

 

Felixstowe arrival for world's largest container ship

http://www.bbc.com/news/uk-england-suffolk-30700269

 

The Hong Kong-registered CSCL Globe, measuring more than 400m (1,313ft) in length, docked at Felixstowe loaded with about 19,000 standard containers.

 

The MSC Oscar just became the world's biggest container ship

http://www.vox.com/2015/1/8/7513317/container-ship-msc-oscar

 

19,000 standard containers .... takes nearly all the resoures of a port to load and unload for about 5 days.

 

Thu, 02/05/2015 - 16:05 | 5748746 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

The average dockworker now makes $147,000 a year in salary, plus $35,000 a year in employer-paid health care and an annual pension of $80,000, according to an association press release.

Dock workers get paid waaaaayyyyyyy too much!

Thu, 02/05/2015 - 16:07 | 5748754 Headbanger
Headbanger's picture

It's cause Putin has Asperger's syndrome!

http://www.usatoday.com/story/news/politics/2015/02/04/putin-aspergers-s...

You fucking mooks!

Thu, 02/05/2015 - 16:26 | 5748814 ZerOhead
ZerOhead's picture

Could be worse... could be ass burger syndrome (don't ask)

P.S. You keep forgeting to put the /sarc tag in...

Thu, 02/05/2015 - 16:47 | 5749001 g speed
g speed's picture

Whats an average dock worker??  crane operaters I can understand ---stevedores yeah ---but average dock worker??  well, in any case its minimum wage blowback for sure--just saying. I don't think many on here would climb 200 ft up a skinny stair to sit atop one of those big diesel electric cranes to run it--much less walk out on the boom to do wire maintenance--they run in bad weather as well as good-- tough scary job--or stand on a scaffold 100ft off the water on the end of the boxes and lift 20ft steel holddowns overhead to hook the boxes---and like the man said--12% of US GDP goes through those ports-must be worth something.  Compared to what cops do these guys work.

Thu, 02/05/2015 - 17:47 | 5749272 divingengineer
divingengineer's picture

You're still talking about a 70K a year job. Not twice that.  I have been a commercial diver, welder, piledriver and deckhand in the past, so I agree it is dangerous and dirty work, however they are dock workers, it takes an IQ of no more than 70 and about 40 hours of training.  Labor is a market, like anything else.  

Fri, 02/06/2015 - 18:00 | 5753387 mkkby
mkkby's picture

Thanks to the insane greed of these unions we all have to get screwed by Nafta, H1B's and illegal immigration.  How can you blame businesses from trying to survive when they have to deal with parasites like this every day?

I'll be happy when these idiots get automated out of a job and end up in an alcoholic coma.

Thu, 02/05/2015 - 17:49 | 5749287 ZerOhead
ZerOhead's picture

For $147K a year I'll do all that and resist the temptation to urinate on all those below me...

Thu, 02/05/2015 - 18:07 | 5749378 Overfed
Overfed's picture

Scale for a Longshoreman in my neck of FEMA regionX is around $32/hr + bennies.

Thu, 02/05/2015 - 18:13 | 5749403 pemdas
pemdas's picture

Longshoremen trying to grab it while they can. Two years from now the container ships will use the expanded Panama Canal and unload at a right to work state, like Texas or Georgia.

Thu, 02/05/2015 - 18:50 | 5749566 TruthInSunshine
TruthInSunshine's picture

It will ALL be automated within 7 years, MAX.

Thu, 02/05/2015 - 20:38 | 5749926 MiguelitoRaton
MiguelitoRaton's picture

Like Reagan did with the air traffic controllers, Obama will order the dock workers back to their jobs, like the union buster he is...just kidding.

Thu, 02/05/2015 - 20:58 | 5749991 nuubee
nuubee's picture

Keep in mind people, dock workers make that much money, and many of them never finished high school. Dockworkers are a special breed of pussy.

Thu, 02/05/2015 - 23:02 | 5750380 Pairadimes
Pairadimes's picture

What if they call a strike, but the economy is so bad that no one notices?

Thu, 02/05/2015 - 23:05 | 5750390 Stuck on Zero
Stuck on Zero's picture

Many have tried to stop the ILWU but their strikes are honored by AFL and Teamsters.  Everything gets shut down.  No politician would dare stand up to them. 

Fri, 02/06/2015 - 00:10 | 5750573 ufos8mycow
ufos8mycow's picture

You forgot China's Nicaragua Canal. When that gets built the Panama Canal will only be used for pleasure craft and US warships.

Fri, 02/06/2015 - 16:24 | 5750973 IronForge
IronForge's picture

Tijuana or another Mexican Port. 

I understand CAN and MEX are going to benefit from this
http://www.bloomberg.com/news/articles/2014-08-27/canadian-ports-win-as-...

Asian Traffic will gain 2-3 Days by offloading in CAN rather than in SFO/LAX(using airpots for my convenience); and I'm sure MEXican Ports will be cheaper.

Those 147K+35+80 Figures are incredible.  I once had a Storekeeper on my Ship who (good worker, however) "Alcoholed" himself out of Nuke Boats; and ended up "Alcoholing himself" to have the idiocy to Fight and Punch out 2 Marine Officers in a Bar Room in BAHRAIN.  He was obviously jailed and deported within a few days (luckily); and BCD'd (Bad Conduct Discharged) out of the Navy.  I tried to keep him of trouble a few times (and put him on restriction so he can cool his head and avoid getting himself Court-Martial'd for Bad Checks all over the Navy Base - you'd figure he'd BUY his own Bottles and stash it in a Locker, or rent an apt and drink at home); but one can only do so much. 

I recommended a General or OTH (Other Than Honorable); but I guess punching people in what's technically a "Dry Muslim Country" was a very bad Idea.  Yes, he put a chit in to go out on Liberty Call during one of our Wartime Deployments while on restriction - Yes, I recommended against it, since we were in a "Dry" Country (even if drinking was allowed (the Saudis drove/flew there to drink),  public drunkenness was inexcusable) - I think I was the only one in his Chain who did.  IIRC, I remember the CO (a CAPT) and my XO came onboard from being called ashore before we left, looking as if people with lots of solid gold on their shoulder boards (i.e., Admirals) and Diplomatic Power "pee'd" all over their faces; then yelled at them for getting pee on their Superiors' Shoes...

The Storekeeper?  He got busted down to a "Seaman" before he got booted (he almost could have made it to Chief if he kept it together for 4 more years until he was eligible for retirement); and got a job as a Dockworker driving a forklift.  To think that (provided that he sought more Medical Help) the ex-Storekeeper may have been making a pretty penny while I've been busting my hump with my Consulting Business after the Dot Com Bust...makes me momentarily reconsider my Career Choices.  ROTFL. 

Hope he made it out for himself, Funny, though, that several State/Fed Employees who observed my situation have brought up his name; and when his name came up when I was visiting my Mother at Little Company of Mary Hospital in Torrance one day, some bizarre Caucasians were repeating comments by another Sailor who claimed I was "the only Officer he served with who kept him out of trouble"...

They should be thanking me instead of stalking me; but guess I'll look into that later...  WTF!!!

Fri, 02/06/2015 - 02:13 | 5750794 anti-republocrat
anti-republocrat's picture

"Scale for a Longshoreman in my neck of FEMA regionX is around $32/hr + bennies."

 

Hmm.  That's only $64K/year assuming 50 wks work times 40hrs.  So where is all this talk of $147K coming from?  Is this the usual elite habit of conflating the cost to the employer with the wages the worker is paid?  I see it done with teachers all the time, where the school board tells the press it costs them an average of $60K to employ one teacher and the press blindly says that's what teachers earn.  But the higher figure includes the benefits including retirement, healthcare, employer share of FICA and sometimes even some other costs like administrative support.

Fri, 02/06/2015 - 10:36 | 5751549 Stuck on Zero
Stuck on Zero's picture

Fake overtime and bribes by the employer to not damage things.

Fri, 02/06/2015 - 11:21 | 5751785 jerry_theking_lawler
jerry_theking_lawler's picture

That's up north from CA...what he is saying is it is cheaper, so if they would build the infrastructure there they could bring in more ships to this area...aka competition. In reality, this should keep prices lower.

Fri, 02/06/2015 - 04:13 | 5750906 DIGrif
DIGrif's picture

Your a good man ZerOhead...good man.

Thu, 02/05/2015 - 22:14 | 5750235 sonoftx
sonoftx's picture

Mr Speedo; must not be many men where you are from. Men that I know overcome a lot of fears to provide for their families(including sitting on a very small seat out in the breeze to paint a water tower for a lot less money no retirement and no healthcare)These guys are just spoiled rotten; tell them to look around at the wasteland around them. The truly bad thing is is that they will sell their house when they retire for a couple of million, and bring their pension to Texas and buy a "ranch" of 30 acres and pay outrageous prices for the land because 5000 an acre is cheap and drive land prices sky high and all of their kids will follow them because they can't lose their gravy train and they will all complain because everyone her drives a pickup or SUV. They will also vote for anyone who keeps the gravy train going. So please if you are from California stay the fuck out of Texas unless you are a small buisennesses man looking for a friendlier atmosphere.

Fri, 02/06/2015 - 11:31 | 5751834 Almost Solvent
Almost Solvent's picture

Texas will be overrun in 10 years - max - just like the rest of the US. 

 

It's about dragging everyone/thing/place down to the same level for our corporate overlords. 

 

 

Thu, 02/05/2015 - 16:50 | 5749015 Ying-Yang
Ying-Yang's picture

$35,000 a year in employer-paid health care

WTF? $2,916 a month for healthcare?

Are massages by big breasted blondes in network?

Thu, 02/05/2015 - 18:45 | 5749551 buyingsterling
buyingsterling's picture

No kidding. This is MENTAL.

Thu, 02/05/2015 - 19:45 | 5749758 thamnosma
thamnosma's picture

Transgender operations are expensive.

Fri, 02/06/2015 - 01:41 | 5750748 Pairadimes
Pairadimes's picture

No kidding. There must be a procedure code for happy endings in that market.

Thu, 02/05/2015 - 16:34 | 5748918 Uncle Remus
Uncle Remus's picture

JFC. This whole "your mentally ill if you don't agree to be a slave" schtick is some seriously desperate and depraved shit. In this case, I'd call it projection on the part of the sociopath fuckwits in Vichy DC. I'm sure a similar report will surface about the new government of Greece soon enough.

Thu, 02/05/2015 - 16:38 | 5748925 Mike Masr
Mike Masr's picture

This Pentagon crafted propaganda is nothing but bullshit as Putin is the toughest leader on earth. Putin won't fold, back down or be baited. 

Too bad we don't have anyone like him in the US. This asperger's bullshit is probably humorous to him.

Funny though, Putin says McCain is a retard as a result of brain injuries caused by the Viet Cong!

Thu, 02/05/2015 - 17:39 | 5749247 Ying-Yang
Ying-Yang's picture

Read "The Real McCain"

Schechter mentions briefly a number of McCain's obvious personal weaknesses, including his dissolute youth and poor academic record (he graduated sixth from the bottom of his class of nearly 900 students at the Naval Academy), his divorce, and his speedy remarriage to a wealthy younger woman, a beer heiress whom he courted while still married, and has helped bankroll his career ever since. Where such flaws as McCain's volcanic temper are concerned, Schechter ties them to specific incidents, which are legion. In addition, he points out McCain's reciprocated love affair with powerful members of the Beltway media elite, which is not shared by journalists in his adoptive home state of Arizona. Frightening evidence is provided of McCain's ignorance of numerous issues, such as the economy, public health, and the advisability of maintaining and even expanding the war in Iraq.

He is a retard.

Thu, 02/05/2015 - 20:06 | 5749824 weburke
weburke's picture

his temper got men killed on his carrier. he was in his plane and FIRED 2 missles, thinking they would go over the heads, but no they didnt. He was immediately transferred because the men on board were gonna get revenge. Not to mention his leaking key data about his plane and methods to north vietnamese, which those in the know estimate was responsible for up to 70 percent of the shoot downs after his help. Hence the statue of him in north vietnam.

Fri, 02/06/2015 - 07:44 | 5751062 Cloud9.5
Cloud9.5's picture

Wet start.  The guy who worked the next door down from me was a colonel who was there.

Thu, 02/05/2015 - 20:11 | 5749843 BigJim
BigJim's picture

He is a useful retard, as Lenin might have said.

Thu, 02/05/2015 - 23:44 | 5750508 August
August's picture

To borrow a phrase, MCain is low-life scum.

Who hasn't missed a monthly federal check since he was 18.

Fri, 02/06/2015 - 00:20 | 5750596 e_goldstein
e_goldstein's picture

 Funny though, Putin says McCain is a retard as a result of brain injuries caused by the Viet Cong!

Nah, McCain was a retard long before he ever met the Viet Cong.

Thu, 02/05/2015 - 17:42 | 5749265 WhackoWarner
WhackoWarner's picture

"Researchers can't prove their theory about Putin and Asperger's, the report said, because they were not able to perform a brain scan on the Russian president. The report cites work by autism specialists as backing their findings. It is not known whether the research has been acted on by Pentagon or administration officials."

 

I am laughing like it is already Friday afternoon at the bar.  Good one.

Thu, 02/05/2015 - 18:12 | 5749400 WhackoWarner
WhackoWarner's picture

Oh the evil.

I suggest Putin needs to submit to a brain scan immediately.  Otherwise it is a Russkie plot to capture my precious bodily fluids.

 

Brain scan to be conducted on US soil and supervised by Fed.

Thu, 02/05/2015 - 18:35 | 5749506 Chauncey Gardener
Chauncey Gardener's picture

Just remember, it's all about Purity of Essence.

Fri, 02/06/2015 - 04:59 | 5750941 SoDamnMad
SoDamnMad's picture

Headbanger

Only 7 Russian trolls.  Maybe they are going on strike

Fri, 02/06/2015 - 05:06 | 5750945 SoDamnMad
SoDamnMad's picture

Headbanger

Only 7 Russian trolls.  Maybe they are going on strike

Thu, 02/05/2015 - 17:39 | 5749251 cheech_wizard
cheech_wizard's picture

I'm in the wrong field of employ. Only at the peak of the first internet bubble was I making that kind of money as an engineer.

 

Thu, 02/05/2015 - 17:47 | 5749282 WhackoWarner
WhackoWarner's picture

I used to have a bit of contact with Longshoreman's Union.  Very good contracts that date back forever.  Would I give up an inch?  Not likely.  HOWEVER even 35 years ago a huge percentage of the guys I knew were lazy time-wasters.

Used to go to the "hall" and with seniority claim jobs on the Vancouver waterfront midnight shift.  Pay incentives were huge even then.  Many would take a six pack to work and sleep.  But that was not all of this union by any means.

Fri, 02/06/2015 - 03:30 | 5750886 Arius
Arius's picture

so were the car makers up in Michigan ... but look at them now.

 

now is the time for californians and then who knows will see ...

 

same happen in greece in stages one by one ... hopefully this country will make it back

Thu, 02/05/2015 - 17:41 | 5749259 divingengineer
divingengineer's picture

I'm in a union and when I read about these guys I know what I'd do if I were a manager at one of those ports.

Bring in the scabs.

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