East, Gulf Coast Port Workers on Strike; Railroads Ready (UPDATED 10/2)
As had seemed increasingly likely, the International Longshoremen’s Association (ILA) went on strike at 12:01 a.m., Oct. 1, rejecting a last minute offer from the employers’ organization, United States Maritime Alliance (USMX), and shutting down U.S. ports from Maine to Texas, with ILA rank-and-file members setting up picket lines at waterfront facilities up and down the Atlantic and Gulf coasts.
There had been a faint glimmer of hope late Sept. 30 when USMX released an update saying:
“In the past 24 hours, the USMX and ILA have traded counter offers related to wages. The USMX increased our offer and has also requested an extension of the current Master Contract, now that both sides have moved off their previous positions. We are hopeful that this could allow us to fully resume collective bargaining around the other outstanding issues, in an effort to reach an agreement.
“Our offer would increase wages by nearly 50%, triple employer contributions to employee retirement plans, strengthen our health care options, and retain the current language around automation and semi-automation.”
The ILA rejected that proposal, saying that it “fell far short of what ILA rank-and-file members are demanding in wages and protections against automation.”
“USMX brought on this strike when they decided to hold firm to foreign owned Ocean Carriers earning billion-dollar profits at United States ports, but not compensate the American ILA longshore workers who perform the labor that brings them their wealth,” ILA President Harold Daggett said. “We are prepared to fight as long as necessary, to stay out on strike for whatever period of time it takes, to get the wages and protections against automation our ILA members deserve.”
The strike followed the expiration of a six-year master contract between the ILA, which represents some 45,000 workers, and the USMX. According to a New York Times report, the last time the union walked out across the East and Gulf Coast ports was in 1977, “snarling container shipping for more than six weeks.”
The current strike affects 36 ports, and J.P. Morgan estimates “that a strike that shuts down East and Gulf coast ports could cost the economy $3.8 billion to $4.5 billion per day, with some of that recovered over time after normal operations resume,” the Associated Press reported Oct. 1.
Uncertainty now reigns. “Trade experts say that a short strike would cause little lasting damage but that a weekslong stoppage could lead to shortages, higher prices and even layoffs,” noted The New York Times, which said “[a]round three-fifths of the nation’s container shipments go through ports on the East and Gulf Coasts, including the Port of New York and New Jersey, the third busiest in the country, and fast-growing ports in Virginia, Georgia and Texas.”
Port Authority of New York and New Jersey Executive Director Rick Cotton said on Sept. 30 that ”around 100,000 containers would be stored at the port during the strike and that 35 ships arriving over the next week would be anchored offshore,” according to the Times.
There had been hope for a settlement on the part of “retailers, auto parts suppliers and produce importers” or that “President Joe Biden would intervene and end the strike using the Taft-Hartley Act, which allows him to seek an 80-day cooling off period,” according to the Associated Press. “But during a Sunday [Sept. 29] exchange with reporters, Biden, who has worked to court union votes for Democrats, said ‘no’ when asked if he planned to intervene in the potential work stoppage.” The White House on Oct. 1 “maintained that Administration officials were working ‘around the clock’ to help negotiations move forward — which included being in direct contact with both USMX and ILA,” the Associated Press reported.
National Retail Federation President and CEO Matthew Shay in a Oct. 1 statement said that “NRF urges President Biden to use any and all available authority and tools — including use of the Taft-Hartley Act — to immediately restore operations at all impacted container ports, get the parties back to the negotiating table and ensure there are no further disruptions.”
“A disruption of this scale during this pivotal moment in our nation’s economic recovery will have devastating consequences for American workers, their families and local communities,” Shay said. “After more than two years of runaway inflationary pressures and in the midst of recovery from Hurricane Helene, this strike will result in further hardship for American families. The Administration must prioritize our economy — and the millions of Americans who depend on it for their livelihood and well-being — and intervene immediately to prevent further hardship and deeper economic consequences. It is essential that the ILA and USMX immediately resume negotiations with the intention of finalizing a new master contract without further disruptions and put an end to this stalemate.”
Last month, NRF issued a statement urging the parties to immediately resume negotiations. The group also spearheaded a letter signed by nearly 200 organizations, including the Association of American Railroads (AAR), to President Biden urging the Administration to intervene and avoid a disruption.
Alliance for Chemical Distribution (ACD) President and CEO Eric R. Byer said in an Oct. 1 statement: “ACD is extremely disappointed that the ILA and USMX failed to ratify a labor contract agreement. For months, there has been an unwillingness to formally negotiate in good faith, with both sides allowing a strike to occur despite having months to negotiate and reach an agreement. The ocean shipping market is already in disarray and this strike will result in severe delays, reroutes, and greater uncertainties on the delivery of essential products at countless U.S. ports. ACD urges the Biden Administration to swiftly intervene to resolve this strike by reopening the ports and getting both sides to reach an agreement, to prevent further supply chain disruptions and avoid significant economic consequences.”
The association pointed out that during an 11-day strike on the West Coast in 2002, the reported economic impact was $1 billion per day, and it took six months to recover.
Both NRF and ACD in an Oct. 2 letter (download below) called on President Biden to “immediately use your authorities” to end the strike; that letter was signed by a group of 270 organizations representing American transportation and logistics providers, including the American Short Line and Regional Railroad Association and AAR; manufacturers; farmers and agribusinesses; wholesalers; retailers; restaurants; importers; exporters; distributors; and other supply chain stakeholders.
“This has now become an issue of both economic and national security,” the group wrote. “The strike will cost the economy billions of dollars a day, impacting businesses large and small that are not party to the negotiations, but rely upon the free flow of goods, both imports and exports, through these critical ports. These port closures mean that our farmers are not able to sell their crops to overseas markets, manufacturers are not able to receive critical components for manufacturing facilities, retailers won’t be able to get their holiday merchandise in time and many other industries will be negatively impacted. The longer a strike occurs, the more severe the economic impact and the longer it will take to recover.
“While we would have all preferred for the collective bargaining process to have worked and the parties to have negotiated and reached a deal, that was not the case. The administration must now step in to not only get the ports open again but work with the parties to resolve the outstanding contract issues. The only way the parties can agree on a new deal is if they return to the negotiating table with the help of a federal mediator to ensure they bargain in good faith. Now is the time for leadership to resolve this issue. Thank you for your immediate attention.”
Railroads: Working to Keep Goods Moving
“At Norfolk Southern, we understand the importance of rapid response, frequent communication, and innovative solutions during significant supply chain events,” NS said in a statement to Railway Age. “Our top priority is keeping the supply chain moving and we are working with customers to leverage our network, as well as our partnerships with ocean carriers, short line railroads, and western Class I railroads, to minimize disruptions and ensure that essential goods continue to flow as efficiently as possible.”
NS’s curtailment schedule (download below) went into effect late last month, and the railroad provided customers a matrix outlining its plan for curtailing service between NS Intermodal markets and the port locations “to ensure a measured wind-down.” It also provided a matrix (download below) outlining alternative services that are available for shipping international containers from NS markets to U.S. west coast locations.
“For several weeks we’ve been seeing heavier volume coming to Norfolk Southern from West Coast ports to such locations as Columbus, Ohio,” NS Vice President Intermodal and Automotive Yannik Thomas told Railway Age Editor-in-Chief William C. Vantuono. “We have been working with Western railroads to increase the supply of empty equipment to West Coast ports in anticipation of the shift. We believe this is part of the steamship lines using West Coast ports in anticipation of this strike. We’ve worked with our East Coast port partners to evacuate containers to the extent possible from their terminals prior to the strike. We also closed gates for traffic headed to them a few days ahead of the strike to ensure that only limited volume was stranded on our railroad. These efforts were partially hampered by Hurricane Helene, however we did manage to clear our railroad of most volume destined for East Coast ports.”
CSX in an Oct. 1 statement to Railway Age said that it “closely monitored the ILA contract negotiations and proactively prepared for the work stoppage and service disruptions at East Coast ports.” To minimize customer impact, “CSX took action to accommodate as much freight as possible during this dynamic situation,” the railroad said. “CSX has been flexible, adding service in collaboration with western partners to provide customers with alternative options to West Coast ports unaffected by work stoppages. In anticipation of impacts to a limited amount of domestic shipments at the Port of Baltimore, CSX is offering customers alternative service options to nearby terminals in Philadelphia and Chambersburg, Pa. CSX is hopeful for a swift and effective resolution to the negotiations between the ILA and the ports to ensure minimal disruption to the nation’s supply chains. In the interim, we are committed to keeping our customers informed with timely updates as the situation evolves.”
BNSF told Railway Age that it is “carefully monitoring the situation with the East and Gulf Coast ports and is fully prepared for any shifts in demand for rail service.” The railroad noted in its statement that it has “invested significantly in our people, capacity and resources since 2019, with $2.6B in expansion projects, including more than 100 miles of main track, 8,000 new parking spaces and more than five miles of new crane production tracks.” This year, it said, it “once again had the industry’s largest capital plan, totaling $3.92 billion and playing a key role in our ability to operate a safe and reliable network, while supporting the anticipated needs of our customers.”
“As recently noted in the news, both the San Pedro Bay ports have been handling record volumes, and in fact, in August, the Port of Long Beach had the busiest month in its 113-year history, with volume jumping 34% from the year prior,” BNSF told Railway Age. “Additionally, The Port of Los Angeles reported an 18% increase from last year. BNSF has been able to handle these record volumes due to the numerous steps we have already taken, and currently, our network is fluid with no international trains holding. Our local teams continue to work with our terminal operators on their specific needs to meet the demands of their facilities.”
Surface Transportation Board Chairman Robert E. Primus last month asked BNSF and Union Pacific (UP) to detail how they would handle the impacts of a work stoppage at the East and Gulf Coast ports. BNSF President and CEO Katie Farmer responded on Sept. 27. “BNSF has been carefully monitoring the situation at the ports, and we are engaged with our ocean carrier customers, the Marine Terminal Operators (MTOs) we serve, and our connecting carriers to ensure we have the best available information on forecasted volumes in order to keep our network running fluidly,” she wrote in a letter to Primus (download below). She said “volume shifts to the West Coast have already been under way for the past six weeks, with the amount of volume diverted increasing each week.” While there has been “some increase in container dwell at West Coast ports, dwell at the marine terminals we serve has largely held steady even as we have seen significant increases in volume,” she noted. “The service performance we are demonstrating now is thus indicative of our ability to handle additional volumes coming to the West Coast as a result of a potential work stoppage.”
Farmer pointed out that international supply chains “are extraordinarily complex, so while our network is speeding up, we must also rely on our interchange partners, terminal operators and dray providers to similarly execute on their operating plans to keep the entire point-to-point network running fluidly.”
“The diverted volumes coming to the West Coast to move to the eastern U.S. result in longer hauls and longer cycle times, which delay the return of equipment for reloading at West Coast ports,” she reported. “These delays can be exacerbated by the dynamics of other parts of the supply chain. If railcars are held or re-routed in the East in order to be reloaded with westbound freight, that will naturally affect how quickly they can be returned for loading to West Coast ports, and port dwell could increase as a result. Conversely, if eastern shippers who lack an export outlet due to the strike are unable to load cars for westbound moves, eastern terminal capacity could be consumed by dwelling origin freight that affects the ability of those terminals to receive freight from the West, slowing our network.”
“Given these dynamics, our plans to provide reliable service are interrelated with how we allocate resources to the West Coast ports,” Farmer said. “BNSF has taken a number of measures to mitigate the effect of offline issues that are otherwise outside of our control. Most immediately, we have pulled all of our international stack cars out of long-term storage and have staged surge locomotives at key points on the Southern Transcon to address power-related contingencies. We are also departing full length westbound trains from Chicago on schedule even without a full load of containers in order to get needed railcars back to the ports. Additionally, we are working with ocean carriers and our connecting carriers to expedite billing of equipment back to the West Coast, including working with these stakeholders to provide eastern exporters with a West Coast service outlet. These measures are working. September has thus far been our fastest car-miles-per-day month for our stack cars, and rail transit time for Inland Point Intermodal freight has improved by more than 50% from 2022. Our plans also include measures for contingencies that have not yet come to pass. We have partnered with one of the key drayage providers to stand up a staging yard near our Hobart Intermodal Facility in Los Angeles to provide additional capacity for international volume. Additionally, while destination dwell has thus far remained low, we have ensured container yard capacity is ready at our key destination facilities to facilitate unloading of trains and keep the network fluid if destination dwell begins to increase.”
UP also provided Railway Age with a statement on its actions leading up to and following the strike. ”Union Pacific remains in close contact with our customers and interchange partners as we execute contingency plans focused things within our control, such as providing extra equipment and crews,” the railroad said Oct. 1. “We’ve already seen a shift in volume at the West Coast ports, handling record intermodal volume in August at the ports of Los Angeles and Long Beach.”
To plan for “a safe and orderly shutdown,” UP on Sept. 30 told customers that it would institute the following measures:
“• Effective Tuesday, October 1, 2024 at 00:01, Union Pacific will implement waybill restrictions for all Port Houston Barbours Cut and Bayport intermodal lanes.
“• Markets include Dallas, El Paso, Laredo, Phoenix, Los Angeles, Oakland, Denver, Salt Lake City, Chicago, Kansas City, and Memphis (Marion).”
On the same day, it provided a letter to STB Chairman Primus, highlighting, like BNSF, its efforts to handle volume shifts (download below).
“As part of our strategy of Safety, Service and Operational Excellence, we expect the unexpected,” UP CEO Jim Vena wrote in the letter. “We keep a buffer of resources to handle the ebbs and flows of our business, which has allowed us to recover quickly from severe weather and natural disasters, maintain fluidity during the recent Canadian rail work stoppage, and continue to improve the service we sold our customers. This approach also is enabling us to successfully handle the increased traffic we are seeing in 2024, with international volumes up more than 20% year to date. Additionally, we are successfully navigating recent shifts as shippers divert traffic to the West Coast in anticipation of a strike. In September alone, our year-over-year volumes are up more than 40%. We expect some of these shifts to continue, and we are well-positioned to support it.”
Vena noted that similar to UP’s preparations for the Canadian rail shutdown, which he called “another fluid situation that involved numerous parties,” the railroad is “executing contingency plans focused on what is within our control. This includes strategically staging a buffer of resources to accommodate the shifts in volume.” It is allocating its resources this way, he said:
“• We are actively managing our fleet of well cars to balance resources and ensure the most fluid rail system possible. This includes increasing our well car supply for the Los Angeles and Long Beach region by 27% since the beginning of September.
“• We added crews at our inland intermodal ramps, including our Global 4 facility outside Chicago, Illinois, and in Marion, Ark. Thanks to increased capital investments, we are setting record lift production rates at both facilities.
“• We positioned additional equipment at Global 4, enabling us to efficiently stack and unstack containers.”
Vena told Chairman Primus that along with UP’s port partners, it has invested “billions to provide available capacity that gives the West Coast ports the ability to quickly take on extra freight.”
As UP responds to “this evolving situation,” Vena said, “we are committed to transparently communicating with our stakeholders. Our daily cross-functional briefing call is driving internal resource alignment, and our Marketing and Sales and Customer Care and Support teams maintain a constant, consistent open channel of communication with our customers. We also are holding daily calls with the port terminals and ocean carriers, working together to establish plans for maximum throughput capability while being realistic about the incremental volume we can handle and still provide a reliable service product. Partnership at this critical hand-off point is key to reducing dwell – Union Pacific relies on the ports to efficiently unload and reload well cars while we actively balance our fleet so we are prepared to receive and move the container to its next destination.
“We recognize this situation has many elements that could cause a negative ripple effect across the U.S. supply chain,” Vena summed up. “Yet, we remain focused on executing what is within our control to support network fluidity and keep our economy moving.”
The Canadian Class I railroads also commented on the situation. CN on Oct. 1 told Railway Age: “We are aware and monitoring the strike closely and working with customers and partners to see how we can help.”
Canadian Pacific Kansas City said: “We are closely following developments and working directly with our customers.”
At the Morgan Stanley Laguna conference in early September, CPKC President and CEO Keith Creel discussed shipper diversification.
Creel was asked: “Obviously the labor disruption in Canada has been a bit of a setback in the short term. But there’s a potential for East Coast U.S. port labor disruption later this year as well. Is that potentially an opportunity? Are you maybe seeing some benefits on the East Coast of your network and with some share gains at all?”
Creel answered: “I think the opportunity from that for us is more about customers’ willingness to consider diversification their supply chain. So historically, customers were burned on the West Coast. They shifted some to the East Coast. Now they might get burned on the East Coast, we shift some back to the West Coast. Well there’s a value play. And since all this shifting has occurred, we’ve talked about Lazaro Cardenas. We talked about — it’s a port that is one of the most advanced ports in Mexico. It’s got 2 million of TEU capacity now. It’s running at 50% capacity. It has sustained and enjoying the greatest growth in Mexican ports, primarily domestic, but that’s where we introduced this international project. So what’s happened is we’ve had much more interest from the Costcos of the world, the Home Depots of the world, Toyotas of the world, big players that move products that had to get to shales or to automotive facilities that have test moves on the water now to Lazaro to feed Texas markets, which may have been fed East Coast or maybe Fed West Coast so that whole concept is starting to get legs and starting to gain traction. So I think — and all honesty, the East Coast has made those customers more willing to say, ‘You know what, let’s try it out.’ And once they tried out, it works extremely well right? It’s extremely reliable. The reliability of the trains at times, the distance from the port, the transit time of the port from ship to railcar to our terminal in Kendleton, Texas or a terminal in Wiley, it’s unparalleled. It saves time off ships and it gives the customer a reliable transit. So once they experience it, it’s going to be hard. When you know it works, you eliminate the risk from the trial moves, it’s going to grow. It’s going to be much like what happened — I said this a long time ago, like Prince Rupert. Prince Rupert, you had to had a crawl before you walk, you had to walk before you run, but I would say it’s compelling. Back then, I was involved in all that. There were a lot of naysayers and people that didn’t believe. There’s space for both ports to do well. L.A. Long Beach is going to do well. East Coast is going to do well. This is going to serve the market, to need the premium products, they need to get to shelves that they need to get to market, and we’re going to be able to carve out our little niche that’s going to be extremely valuable for the shipper and valuable for the railroad.”
ITS Logistics, in its October 2024 Port Rail Ramp Index (see above), said both the East and Gulf Coast regions have been moved to a severe status, as all operations and equipment “will be adversely affected by the current ILA strike.” The index calls out that, “similar to the COVID crisis, a significant impact will not be felt during the strike,” according to the supply chain and 3PL firm. “However, once operations recommence, much of the supply chain will experience the strike’s negative effect.” It noted that congestion, lack of equipment/yard space, capacity constrictions, and vessel congestion will “stress all supply chains.”
