Eric Gerster, CFA, recently created a presentation warning that a shutdown of maritime ports on the West Coast was imminent due to contentious and rapidly deteriorating negotiations and relations between the International Longshore and Warehouse Union (ILWU) and Pacific Maritime Association (PMA).

1. West Coast Maritime
Port Shutdown
by Eric Gerster

2. Why?
After nine months of negotiations and increased gridlock, vessel
operations at West Coast maritime ports may be completely shut
down in as little as five to ten days, according to a recent article in
MarketWatch.

3. Disagreement
The disputed contract covers 20,000 workers and 30
different ports, so the negotiations could be foreseen
to move slowly, but with both sides blaming each
other for a cargo slowdown, a lockout seems
imminent.
!
“After three months of union slowdowns, it makes no
sense to pay extra for less work,” according to Pacific
Maritime Association (PMA) spokesman Wade Gates.

4. ILWU Stance
“PMA is leaving ships at sea and claiming there’s no
space on the docks, but there are acres of asphalt just
waiting for the containers on those ships, and hundreds
of longshore workers ready to unload them,” said
International Longshore and Warehouse Union (ILWU)
International President Robert McEllrath. “The employers
are deliberately worsening the existing congestion crisis
to gain the upper hand at the bargaining table.”
!
McEllrath claims that the sides are not so far apart, with
only a few issues remaining in late-stage negotiations.

5. Serious Consequences
The sides certainly still have time to hammer out a deal,
and should, as a full shutdown would exponentially
exacerbate the costs accrued by the cargo shutdown.
According to a study by Jeffrey Werling, the executive
director of the University of Maryland’s Inforum, the
slowdown has already cost the national economy
around a billion dollars and a lockout would cost an
estimated $2.5 billion per day.

6. Heavy Cost
With the U.S.’s GDP at around $17.71 trillion, a 20-day
shutdown would cost about 0.3% of annual GDP.

7. Consequences Accumulating
With multiple lockouts and slowdowns in the last 15
years, these West Coast ports have lost market share
and have created a dangerous incentive to bypass them
altogether. With the Panama Canal set to double its
breadth by 2016, many shippers will have a simple
alternative to the West Coast ports.

8. Shutdown Imminent
If the two sides can’t work out a deal, the longshore workers
and surrounding businesses predicated on their consumer
participation are likely to bear the brunt of the losses. The
corporations that utilize these ports have options like airfreight,
with which they can ship without disrupting much of their
business. However, the long-term cost of airfreight is much
greater.
!
Unfortunately, it looks as though a shutdown is likely.

9. To learn more, please visit
http://EricGerster.net