Labor Unrest May Continue to Imperil Importers

Larry Thomas -- Furniture Today, March 18, 2013

GREENSBORO, N.C. - Although a contract agreement in January averted a dockworkers strike at ports along the East Coast and Gulf Coast, more labor unrest that could impact furniture importers is on the horizon, a veteran logistics executive said at a recent conference here.
     Speaking at the American Home Furnishings Alliance's annual Global Supply Chain Management Conference, LF Logistics executive David Bennett predicted that contract talks involving West Coast dockworkers will be contentious leading up to the September 2014 expiration of their labor contract.
     Bennett, the company's general manager for business development, said the International Longshore and Warehouse Union, which represents West Coast dockworkers, will feel empowered by the contract achieved by the International Longshoremen's Assn., a separate union that represents East Coast and Gulf Coast workers.
     "The ILA got everything they asked for ... so the ILWU has to be thinking it has the upper hand," Bennett told the audience. "Make sure you keep an eye on things, because it could turn ugly."
     He said importers got a taste of what could happen when the ILWU's Office Clerical Unit staged an eight-day strike in late November and early December at the ports of Los Angeles and Long Beach, which happen to be the nation's busiest.
     Dockworkers honored the picket lines, but the walkout didn't shut down the ports completely because clerical workers at a few shipping terminals remained on the job.
     "Now, there is a lot of animosity between the ILWU and the clerks who did not strike," Bennett said. "That only adds to the labor unrest."
     The tentative contract between the ILA and operators of East Coast and Gulf Coast ports is expected to be ratified by mid-to late March, he said. The new agreement would expire Sept. 30, 2018.
     In addition to labor unrest, Bennett said furniture importers should continue to expect volatility in shipping rates this year, especially for containers shipped here from Asia.
     He said shipping lines are trying to make up for moneylosing operations in Europe by raising rates on routes between Asia and North America, and noted that rates on those routes went up at least three times in 2012 and added roughly $1,500 to the cost of shipping a 40-foot container.
     "Europe is a mess. Their recovery is going to take considerably longer," Bennett told conference attendees. "The carriers had to find a way to stay afloat. They had to get as much as they can on the trans-Pacific routes."
     But even on trans-Pacific routes, demand is recovering very slowly from recessionary levels, and carriers continue to add larger vessels to their fleets. Most such vessels have a capacity for 10,000 to 16,000 TEUs.
     "Once again, we're looking at too much tonnage chasing to little freight," said Bennett. "Right now, if nobody added any new vessels and nobody took any capacity offline, it would probably take three or four years for demand to catch up with supply."
     He said small and mid-sized importers suffered the most from rate volatility last year since most of them book shipments through non-vessel operating companies, or NVOs. However, he thinks larger shippers - many of whom negotiate directly with shipping lines - may experience more volatility this year.
     "We do think a slight uptick will occur ... but it's a fragile recovery. The U.S. economy is going to remain fairly weak," he said.