Canada’s Asia-Pacific Gateway would consider it essential to maintain B.C. port reliability; waterfront labour market reality would say it’s highly unlikely.
Repeating the current eight-year contract that’s set to expire between the 6,000-member International Longshore and Warehouse Union Canada (ILWU)and the BC Maritime Employers Association (BCMEA) would be an unprecedented achievement.
The deal signed in February 2012 after more than two years of negotiation has delivered relative job-site peace on a Vancouver waterfront that has a history of combative union-employer labour relations. It has consequently helped shore up B.C.’s reputation for port reliability in a competitive transpacific goods-movement marketplace where stability is fundamental to retaining and building market share.
Cargo-handling slowdowns and interruptions from mid-2014 through early 2015 at ports along the United States West Coast caused by stalled longshore union contract negotiations diverted containers north to B.C. and south to Mexico and through the Panama Canal to Gulf of Mexico and East Coast competitors.
The ports of Prince Rupert and Vancouver benefited from that protracted labour dispute. Prince Rupert’s container traffic jumped 42% in 2015’s first quarter compared with 2014’s; Vancouver’s increased 15.2% during the same period.
To retain any long-term market advantage from the interruptions in cargo movement at U.S. terminals, both ports will need to maintain their commercial appeal for global shipping lines.
Service reliability is fundamental to that appeal.
The pressure, therefore, is on both sides to reach an agreement sooner than later on a new a contract to replace the one that expires on March 31.
Increasing that pressure: last July, the U.S. ILWU and Pacific Maritime Association agreed to a three-year extension of the contract that ended the 2014-15 standoff. The extension provides labour peace on the U.S. West Coast waterfront through to June 2022.
Terry Duggan, BCMEA president and CEO, said his organization wants to avoid “at all costs” any disruption similar to that suffered by Los Angeles, Long Beach and other U.S. competitors to B.C. ports.
He said the BCMEA has exchanged formal notice to bargain but no proposals yet with its counterparts at the ILWU and Ship and Dock Foremen Local 514.
But Duggan added that another eight-year term is unlikely.
“I’m not aware of any other longshore jurisdiction in North America that has achieved anything like eight years, so that would certainly be on the long end. We do want to come up with a term that is sufficient to send a message to port users, the shipping community, that there is stability on the West Coast of Canada and that we are a preferred port of entry.… We don’t want a wobble here that sends cargo south.”
He said the labour peace achieved during the eight-year contract laid the groundwork for the port sector’s recovery from the 2008-09 recession, which cut around 20% from BCMEA member business volumes.
Hours worked at member operations tell the tale.
In 2006-07, annual hours worked were around six million; the recession knocked that number down to 4.7 million.
But during the contract’s eight-year term, Duggan said, “we not only recouped [the lost hours], we have expanded dramatically; we are now running at eight million hours per year. A lot of that is attributable to the message of stability and reliability that we were able to share with our customers in Asia.”
Stability has not always been the message those customers have received from Canada’s West Coast.
Vancouver’s port reliability suffered setbacks in the 1970s, when there were lengthy labour shutdowns, and again in the late 1990s when the ILWU was locked out by employers.
Illegal work stoppages also strained employer-union relationships. In 2010, the BCMEA claimed there had been 35 since 2008.
Port operations have also been disrupted by an ongoing dispute between container truckers and the port over pay rates and trucker wait times at container terminals.
ILWU Canada president Robert Ashton declined to comment on contract length or any other issue that might be on the bargaining table this year.
“[But] the parties are looking to get something done as fast as we can for the benefit, not only of each side, but also to our country.… I don’t see any mountains that we can’t get through; [both] parties want to sit down and get this done, because we understand what this entails; we know people are watching, but as far as our customers and the people of Canada are concerned we are open for business.”
The continued migration of transpacific container cargo market share through the widened Panama Canal to ports on the Gulf of Mexico and eastern seaboard poses another competitive threat to B.C. ports.
As Jones Lang LaSalle’s (NYSE:JLL) 2017 Port, Airport and Global Infrastructure report points out, West Coast ports have posted the slowest container cargo growth rate in North America since 2013. Growth at Long Beach, Seattle-Tacoma, Vancouver and Oakland has been under 5%, while southeastern and mid-Atlantic ports all grew by close to 20%.
Walter Kemmsies, managing director and chief strategist for JLL Ports, Airports and Global Infrastructure, told Business in Vancouver last year that the rise of the Gulf Coast ports is the most critical of the five major disruptive port trends listed in JLL’s report.
He also noted that one of the main disadvantages for Canada’s West Coast ports compared with their American competitors is their distance from the growing population centres in the southern half of the United States.
Kemmsies added that container cargo traffic to North America’s West Coast will continue to grow in 2018 but so too will the diversion of transpacific container traffic to West Coast competitors.
Among the reasons for that cargo migration south and east, said Kemmsies: West Coast port congestion and importers’ investment in building distribution centres in the Gulf Coast area as ocean carriers launch direct services to China, Japan and other north Asian countries.
According to the U.S.-based Journal of Commerce, “East and Gulf coast ports’ share of U.S. containerized imports from Asia rose to 34.6% during the first 10 months of 2017, compared with 26.3% in 2010.”
JLL estimates that West Coast ports handled approximately 54% of all U.S. 20-foot equivalent units (TEUs) in 2016.
Meanwhile, disruptive supply chain technology is a significant issue facing dockworkers at all North American ports.
Container terminal automation issues have stalled current contract negotiations between the International Longshoremen’s Association and the United States Maritime Alliance Ltd. at East and Gulf coast ports.
Ashton wouldn’t say whether the wave of supply chain technology and terminal automation headed for major ports around the world will be a factor during this round of negotiations.
But ports that don’t retool their infrastructure and workforce to handle larger ships efficiently will lose market share to those that do, because for the global container carrier sector it is fast becoming a big-alliance, big-ship world.
The top 10 carriers will soon have 82% of the world’s container capacity, Alphaliner noted in December. The shipping data company also pointed out that, with seven mega-vessels of between 19,000 and 21,000 TEU capacity joining the global fleet in January, it will be a record month for container ship deliveries.