Talks to Avoid East Coast Port Strike to Resume, Details Kept Mum
This week's announcement that the International Longshoremen's Association and the U.S. Maritime Alliance will go back to the negotiation table to avert a longshoreman's strike that would close 15 ports from Massachusetts to Texas may have retailers and manufacturers cautiously optimistic about a deal, but details about when and where that meeting will be are being kept close to the vest.
If no agreement is reached, 4,500 workers at the 15 ports along the East Coast—including the 4,000 dockworkers in New York and New Jersey— could walk off the job on December 30th. The last time there was an East Coast longshoremen's strike was in 1977.
The Federal Mediation Conciliation Service said on Monday that director George Cohen called a meeting of the International Longshoremen's Association and the U.S. Maritime Alliance before the Dec. 29 expiration of the dockworkers' contract extension.
Those familiar with the situation tell CNBC that because of the sensitivity of the discussions, details about the meeting will not be disclosed. Talks broke down between the dockworkers and the shipping companies Dec. 18.
Negotiations broke off after shipping management said they want to cap "container royalties," which are payments made to longshoremen based on the weight of the container cargo.
On Wednesday, the threat of imminent labor unrest at four U.S. Pacific Northwest ports was averted after the dockworkers union said its members would stay on the job despite "substandard" contract terms being imposed unilaterally by grain shippers.
Robert Kunkel, President of Alternative Marine Technologies and Technical Advisor for Mid Ocean Tanker Company and Alterna Capital Partners, says both the shipping companies and the Longshoreman's Union fail to see the big picture on the economy and the impact a weak economy could have on cargo volumes.
"How do you continue to argue over contractual details knowing our current unemployment rate, the container market and China's slowing growth? While the point of contention is the level of container royalties, we should consider the fact that retailers have reported a poor showing of sales for this Christmas holiday," he said.
"The royalties dispute rises from the carriers and ports anticipating growing volume of Asian cargo at Atlantic ports due to the completion of the Panama Canal expansion. But what should be considered are a poor shipping market and a failing U.S. economy, which may reduce volumes and in turn the amount of work available at the ports."
The New York-New Jersey port is the second largest port to handle manufactured goods from China and is the largest port on the East Coast.
According to shipping experts, the New York and New Jersey port handles approximately 10 percent of China imports, 69 percent of Israeli imports and 37 percent of Italian imports.
The products imported from these countries include furniture, plastics, apparel, beverages and chemicals. In 2011, the New York-New Jersey ports handled $208 billion in cargo, the most on the East Coast.
Retailers which heavily rely on the shipping industry to transport their products are anxiously waiting to hear more on the talks between the union and port managers.
"While we are pleased that the two sides will meet again with the Federal Mediator this week, we continue to urge that the parties remain at the table until a new long-term deal is reached and not engage in supply chain disruptions," said Jonathan Gold, Vice President for Supply Chain and Customs Policy for the National Retail Federation.
"We cannot afford to continue to kick the can down the road with a continual threat of a port strike. NRF's members have already put contingency plans into effect to ensure products will arrive on retail shelves," he added. "This is the second time this year they have had to put such plans into place. We need certainty and predictability to ensure efficient supply-chain operations throughout the supply chain, including the ports."
Approximately 3,200,000 TEU of containers and 700,000 cars are handled per year in the port of New York-New Jersey. According to economic data from the Port of New York and New Jersey, the port generates more than $5 billion in annual tax revenues to state and local governments.