No Deal Yet At West Coast Ports, Retailers Urge Resolution
The contract between the two entities that make goods move through the ports at Los Angeles, Long Beach and over a dozen other West Coast ports expires today without a firm sense of when ongoing contract negotiations will be resolved.
The discussions, which come as retailers prepare for their busy shopping season, are just the latest uncertainty to hit warehouse occupiers and are likely to translate into increased industrial real estate demand.
The Pacific Maritime Association, whose members controls the shipping terminals, and the International Longshore and Warehouse Union, whose members are port workers at LA, Long Beach and 27 other West Coast ports, put out a joint statement on the negotiations Friday.
"While there will be no contract extension, cargo will keep moving, and normal operations will continue at the ports until an agreement can be reached," the statement said.
In most cases through the years, work has continued as usual at the ports even after the contract's expiration, while the parties hammered out a new deal, the Journal of Commerce reported.
Notable exceptions took place in 2002, when there was a worker lockout as a result of a breakdown in discussions, and in 2014-2015, when the flow of goods slowed significantly.
"Both sides understand the strategic importance of the ports to the local, regional and U.S. economies, and are mindful of the need to finalize a new coast-wide contract as soon as possible to ensure continuing confidence in the West Coast," the statement's authors wrote.
But in a letter to President Joe Biden issued by the National Retail Federation and signed by more than 150 retailers and trade associations today, the groups urged the president to continue to push for an extension to the current contract, which the businesses said "will provide assurance to the millions of businesses, workers and consumers who rely on the West Coast ports" and is just as important as a new contract.
"As we enter the all-important peak shipping season, we continue to expect cargo flows to remain at all-time highs, putting further stress on the supply chain and increasing inflation," the statement reads.
However the discussions shake out, it’s likely to be another boost to an already hot industrial market.
The industrial market exploded during the pandemic as e-commerce purchases soared, though some indications that there might be a slowdown for the white-hot sector, such as Amazon’s reported pullback, have also cropped up.
“Any sort of disruption or instability, like we've seen in the past two years, only further enhances that desire to have more inventory on hand, which means more warehouses locally, in all different markets,” said Gregg Healy, Savills' executive vice president and head of industrial service for North America.
It also provides further “fuel to the fire” for companies to reconsider their overall supply chains, Healy said, especially when it comes to nearshoring or onshoring production.
“I think the overall theme for business leaders is, once again, revisit your supply chain. Revisit your global sourcing model. Think about not ‘just in time’ but also ‘just in case’ and those just-in-case incidents are coming up more frequently,” Healy said.
CORRECTION, JULY 2, 4:23 P.M. PT: A previous version of this story mischaracterized the role of the Pacific Maritime Association. The association represents operators of shipping terminals. The story has been updated.