After 13 long months of talks and negotiations, there is finally a new West Coast port labor contract. Logisticians far and wide have been able to breathe a sigh of relief as one of their most significant supply chain hurdles is removed.

So, what’s next? 

In this article, we’ll examine the early impact of the new contract and what we see happening in the months to come.

West Coast port labor contract recap

The previous labor agreement between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) expired on July 1, 2022. Port workers had been working without a contract as talks started and stopped throughout the year.

At times, the two sides appeared to be miles apart, with the biggest points of contention being wages and automation at the terminals.

Finally, however, the two sides reached an agreement on June 14, 2023, with assistance from Acting US Labor Secretary Julie Su. The new labor contract is a 6-year deal covering all 29 ports on the US West Coast. The 6 years is notable as, historically, most of the contracts between the ILWU and PMA have been 4-year agreements.

The psychological impact

The immediate effect of the new contract on manufacturers, logistics pros, and shippers that rely on the West Coast ports is a feeling of relief. The 13 months of negotiations were a long slog, and the related fear and uncertainty took a toll on all stakeholders. This negotiation standoff began directly following severe disruptions and the supply chain logjams that plagued the West Coast once imports started back after the height of COVID. It has been one stressful situation after another for the past 3 years.

Now, without the constant fear of negotiation-related labor disruptions at the ports, there is hope that the ports and all supply chain stakeholders can get back to business as usual.

Is the discretionary cargo coming back?

During the West Coast port labor contract negotiations, many shippers began to divert discretionary cargo away from West Coast ports. “Discretionary cargo” consists of products that don’t need to be shipped into a particular port due to timing or geographic constraints. As such, port choice is flexible.

In the past, importers have used L.A. and Long Beach for much of their discretionary cargo since it has a high density of warehouses, transportation, and intermodal hubs. But much of that began to head East as port labor negotiations dragged on.

Will it come back to the West Coast? Many we talk to in the industry are hopeful that it will. But it won’t happen overnight.

Many companies have signed ocean carrier contracts that stipulate volumes and destination ports. As shippers typically negotiate those contracts in the spring each year, many have already committed to import into non-West-Coast ports for the balance of 2023. There is generally little wiggle room to convert that cargo from one port to another.

But there is hope that shippers will bring this cargo back in 2024. Some may do it sooner as there are a few mitigating factors that have come to light.

First, there is currently a severe drought affecting the Panama Canal. This has resulted in officials limiting the maximum ship depth (the depth of the ship below the water line) to 43.5 feet – down significantly from the usual 50 feet.

What this means is that ocean carriers must limit the number of containers on vessels. Container space on those ships is thus scarce. And scarcity equals higher cost. So, with the port labor contract signed, companies may shift freight to the West Coast that may have been scheduled to sail East through the Panama Canal.

There is also the looming East Coast port labor negotiations that impact 36 ports from Maine to Texas. These contracts expire in September 2024. Will there be disruptions – or at least enough fear of disruptions – for shippers to shift cargo to the West Coast? We will have to wait and see.

Stay close to your port services 3PL provider

Now is an important time to stay close to your logistics partners, especially those that handle port services for your business. Such a partnership can not only keep you abreast of coming market changes but help you take advantage of them. Weber Logistics is a West Coast 3PL that specializes in port services at the ports of L.A., Long Beach, Oakland, and San Diego, and also can integrate those services with its robust warehousing and final-mile transportation capabilities. To learn how Weber can help you keep your supply chain agile to quickly adapt to changing market conditions, contact us today.