U.S. port employers’ success in reaching contract agreements with American longshore unions has increased the urgency for their B.C. counterparts to negotiate a new deal with port workers here.
The landmark eight-year contract between the BC Maritime Employers Association (BCMEA) and the 6,000-member International Longshore and Warehouse Union Canada (ILWU) expired at the end of March, but, as of press time, the two sides had yet to reach an agreement on its replacement.
Meanwhile, the U.S. International Longshore and Warehouse Union has signed a three-year extension of its contract with the Pacific Maritime Association. The original deal ended a standoff that stalled cargo movement through major West Coast U.S. ports from mid-2014 through early 2015 and diverted some of that traffic north to the ports of Vancouver and Prince Rupert.
The extension reached last July provides a foundation for labour peace through to June 2022 at major ports along the U.S. West Coast, all of which are transpacific cargo competitors to B.C. ports. More recently, the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) reached a tentative agreement at the end of May on a deal that, if ratified, would ensure labour peace at ports along the U.S. East Coast and the Gulf of Mexico until 2024.
The importance those deals have in maintaining smooth operations at key North American competitors to the ports of Vancouver and Prince Rupert is not lost on B.C. maritime industry employers.
Terry Duggan, president and CEO of the BCMEA, said the recent ILA-USMX announcement is “clearly of interest” to his organization.
“From a competitive perspective, that is basically offering a promise of labour stability in the other gateways that we are not able to offer on either the East Coast or the West Coast of Canada,” Duggan said.
Maritime industry contract negotiations are also underway at the ports of Halifax and Montreal.
Negotiating a new contract with B.C. longshore unions is vital for the province’s economy because any service interruptions at West Coast Canadian ports could derail the growth in containerized cargo flowing through Vancouver and Prince Rupert.
As noted in a May 15 Business in Vancouver story (Canadian Ports Lead North America Cargo-Handling Growth), Journal of Commerce data showed that increases in containerized cargo handled by Vancouver, Prince Rupert and Halifax helped Canadian ports to post faster growth numbers than their U.S. counterparts in 2017.
The expired eight-year contract between the ILWU and Ship and Dock Foremen Local 514 and the BCMEA has provided the Port of Vancouver with an extended run of freight movement reliability that has dimmed shipping industry memories of past labour shutdowns.
Vancouver’s port reliability suffered badly in the 1970s, when there were lengthy longshore labour disruptions, and again in the late 1990s when employers locked out the ILWU.
Illegal work stoppages also strained employer-union relationships. In addition, operations at the port’s container terminals have been disrupted by an ongoing dispute between container truckers and the port over pay rates and trucker wait times at container terminals.
While B.C.’s ports have geographical advantages in the transpacific cargo triangle between north and south Asia and North America, several factors threaten to stall their continued growth. They include U.S. President Donald Trump’s protectionist regime, which has escalated trade war skirmishes with China and Canada.
The global container terminal business is also treading water.
In a June report, Drewry noted that terminal operators currently face an unprecedented number of challenges ranging from higher operating and capital expenses to market pressures to lower prices.
Neil Davidson, senior analyst in the U.K.-based shipping consultancy’s ports and terminals practice, said that while container cargo demand growth has been stronger than expected, topping 6% in 2017, new shipping alliances and freight liner consolidation have resulted in “significant market-share volatility for terminal operators [which in turn has] … meant that prices have moved to the lowest common denominator.”
Davidson added that, consistent with what Drewry sees as the inevitable maturing of the industry, return on invested capital for terminal operators appears to be declining. However, that mixed outlook for container terminals worldwide has not chilled investment interest in B.C. terminals.
On June 6, the Ontario Teachers’ Pension Plan (OTPP), IFM Investors and the BC Investment Management Corp. (BCIC) announced a deal in which IFM and BCIC will become equity partners in GCT Container Terminals. Vancouver-headquartered GCT operates four major container terminals in North America, including GCT Vanterm in Vancouver and GCT Deltaport at Roberts Bank in Delta.
Under the deal, OTPP will continue to hold a 37.5% equity stake in GCT, while IFM will acquire a 37.5% holding and BCIC will take the remaining 25%.
IFM, a global institutional funds manager, has US$81 billion under management. BCIC and OTPP have estimated managed net assets of $135.5 billion and $189.5 billion, respectively.
Meanwhile, DP World, which operates 78 container terminals worldwide, including Centerm in Vancouver and Fairview in Prince Rupert, plans to invest $350 million to expand Centerm’s capacity.
The Dubai-based company unveiled a $200 million expansion of its Fairview terminal in Prince Rupert last August and announced June 19 that it had agreed to terms with the Port of Prince Rupert on the next phase of Fairview’s expansion.
The project will increase the terminal’s container throughput capacity to 1.8 million 20-foot equivalent units from the current 1.35 million.
Efficient and reliable cargo handling is critical for the continued success of both companies’ West Coast terminals – as is their ability to accommodate the larger vessels being deployed on transpacific trade routes by the three major shipping alliances that now control 87% of the region’s containerized cargo movement.
Automation and technology will play a key role in that ability. But both will have a major impact on port operations and labour.
In an interview earlier this year, ILWU Canada president Robert Ashton declined to comment on union concerns related to port automation that will be part of current contract negotiations. He would say only that his union is concerned about anything that could “harm a worker’s daily life.”
Ashton added that negotiators were looking to get something done as fast as possible “for the benefit, not only of each side, but also [for the] country.”
Duggan said talks between the BCMEA and longshore unions are continuing, and “I am cautiously optimistic that we will be able to bring in a collective agreement without any kind of service disruption.”
While container terminal automation remains a key bone of contention between employers and unions in West Coast U.S. ports, the global container carrier and port terminal sectors have traditionally been slow to leverage the advantages of the technological disruption that is affecting virtually every other major industry.
According to a recent survey by Port Strategy, a U.K.-based publication for port management executives, 50% of port professionals believe that fewer than 25% of global container ports will be partly or fully automated by 2025. •