NEW YORK A recent breakdown in negotiations between the International Longshoremens Association (ILA) and the U.S. Maritime Alliance Ltd. (USMX) could incite a strike that would affect containerized cargo shipments at ports from Maine to Texas.
Unfortunately, master contract negotiations are not progressing well, and it is expected that there will be a coastwide strike beginning 12:01 a.m. on Sunday, Dec. 30, ILA president Harold Daggett said in a Dec. 19 letter on the unions website.
Orders to handle containerized cargo shall not be honored under the strike, Daggett said. The union is making exceptions for unfrozen perishable commodities, containerized mail, passenger ships, containerized military cargo excluding household goods and non-containerized cargo and automobiles, Daggett said.
If it goes into effect, the strike would affect about 15,000 workers, according to a union spokesman.
Players in the metals and shipping industry were watching the developments with caution Friday, noting that signs indicate a strike is likely at this point.
The odds of a strike are very high, simply because they met last week and did not come to a resolution, Nathan Weseley, president of the West Gulf Maritime Association, told AMM.
However, the union spokesman cautioned against any hasty assessments.
The contract does expire at the end of Dec. 29, so we still have time, he said. We wont know until theres no contract on the 29th.
Nonetheless, there are no further discussions scheduled at this time, he told AMM Friday.
Were waiting to hear back from USMX and the Federal Mediator, he said.
If implemented, the strike would affect container traffic at a number of key ports, including New York, New Jersey, Philadelphia, New Orleans, Baltimore and Houston.
Pretty much every large port would be affected, Weseley said, adding that every industry will likely see some effect. In these days of globalization, what wouldnt be impacted?
Metal industry participants said they are making preparations for the possible strike ahead of the approaching contract expiration date.
Some shippers are already exploring the possibility of delivering export loads to Canadian ports, warehousing company C. Steinweg (Baltimore) Inc. wrote in a letter to its customers dated Dec. 21. It added that most carriers have established congestion surcharges that will be imposed at all U.S. ports depending on the level of disruption and delays that may be caused by any work stoppages or delays.
One scrap market source estimated the range of possible charges at between $700 and $1,000 per container.
A strike would likely hit the nonferrous scrap export market particularly hard due to its reliance on containers, sources said.
What I can see happening (is that) this will hurt the nonferrous export market, especially trades to Asia where they have a high demand for coppers and other metals, a second market source said.
An importer of scrap based in India suggested that a freeze on containerized ferrous scrap exports could push up volumes of bulk scrap exports, as these would not be affected by the possible strike.
But while some are making preparations, other say they dont expect the potential strike to have a large impact.
If the ILA were to strike, theres plenty of other contractors here that can work the cargo, Jimmy Lyons, director and chief executive officer of the Alabama State Port Authority, told AMM. His port exports about 100,000 tons of finished steel in containers annually, he said.
The 14 ports on the East and Gulf Coasts that could be affected by a strike carried 110 million tons of import and export cargo in 2011, according to USMXs website.
According to Weseley, one of the main points of contention between the ILA and the USMX during this round of negotiations is on the issue of container royalties, which are paid by carriers to the union for containerized shipments.
While USMX is seeking to keep royalty payments at 2011 levels for current recipients and exclude new members from the payments, the union considers the issue untouchable, according to a statement posted on the union website following a breakdown in talks Dec. 18.
If the strike begins, President Obama can order an injunction that would give the parties an additional 80 days to reach an agreement, Weseley said.
A number of large shipper groups have already appealed to the White House to take early action to impose Taft-Hartley action to impose a cooling-off period and stop any work interruptions, Steinweg said in its customer letter.
But whether Obama would choose to do so remains unclear.
The strike raises an interesting political dilemma for Obama. I cannot imagine that he would not order them back to work, but he is obviously very pro-labor, so I would not expect him to do this right away, a third market source said.