The Silq Scoop: ILA and USMX Face Off Continues as Congestion Rocks European Ports
The ILA made its move, and the entire country responded. So far, they have received a 61.5% compounded wage increase over six years. This has bought the USMX time for negotiations around introducing automation in ports, which the ILA has steadfastly refused to consider till now. The tentative agreement lasts till Jan. 15, 2025, after which the ILA can renew its call for a strike if the opposing factions do not agree to a common ground.?
As the world held its breath for the ILA and USMX showdown, a storm continued to brew in Europe, as major European ports were struck with logistics bottlenecks. The impact of the three-day ILA strike will only add to that challenge, further complicating operations for shippers, carriers, and other stakeholders.
This edition of the Silq Scoop explores the latest developments and their implications for retailers, importers, and shippers worldwide.
Challenging Road Ahead for USMX and ILA as Negotiations Resume
Who waits over a year to pen a deal, fails, and then believes they can do the same in 90 days? Welcome to the drama unfolding between the International Longshoremen's Association (ILA) and the United States Maritime Alliance (USMX).
Following the short-lived ILA strike that saw every shipping stakeholder glued to press releases and updates on its ramifications, the USMX got the ILA to agree to a tentative deal after intervention from the very top of the government.
However, getting the president to intervene only managed to buy the USMX a short time, meaning they must get the ILA to agree on more challenging issues as fast as possible, including automation, royalties, and work rules, before Jan. 15, 2025. The ILA already came away with one win, which saw a 62% wage increase, so they might go in anticipating more.?
One thing is certain: the ILA has most of the cards because no one wants to see a strike like that again.
Trans-Atlantic Shipping Faces Capacity Crunch Amid Strike and European Port Congestion
Despite all the news about the ILA strike, many did not realize that port congestion had been plaguing Europe in recent months, and it was only getting worse. The bad news is that the ILA strike, however short-lived, is now compounding existing port congestion across Europe.
Experts believe that could lead to significant capacity reductions on trans-Atlantic routes. For example, capacity from Mediterranean and North European routes was already set for a 10% to 14% cut by the end of October. Still, the post-strike delays in clearing backlogged ships may push these reductions to as high as 30%.?
Another problem is that the recent flooding in Europe hinders inland transport, further affecting container flows.
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Warehouse Construction Falls as Demand Drops and Vacancy Rates Climb
Vacancy rates for industrial real estate climbed to 6.4%, and warehouse construction in the U.S. continues to experience a sharp decline. In the third quarter, industrial real estate under development dropped 43% from last year, marking the steepest reduction since 2008. This slowdown seems familiar to the pandemic-driven boom, as many companies behave similarly. They are now holding back on leasing decisions, and rising interest rates impact borrowing costs.
Additionally, warehouse operators reduced payrolls by 11,000 jobs in September, continuing a trend that has seen the sector lose over 171,600 jobs since its peak in May 2022. As developers pull back, there are concerns that if demand picks up, warehouse capacity could become constrained again.
Warehousing and Trucking Jobs Decline Amid Industry Shifts, Signaling Potential Market Challenges
Warehouse demand declines are bad enough, but the jobs created by those warehouses also seem to vanish when there are unoccupied warehouses. And it is not just the warehouses that are impacted; transportation jobs are heading in the same direction.?
Warehousing employment in the U.S. plummeted by 11,000 positions, marking the second consecutive month of decline. Trucking jobs also dipped slightly, losing 700 jobs compared to August, continuing a downward trend from the year's peak in March.
The Yellow bankruptcy heavily impacted the less-than-truckload (LTL) sector, contributing to a 21,000 job loss. Truck transportation employment overall has declined by 12,800 jobs since its March peak. Additionally, rail jobs have decreased, with 2,700 fewer positions than a year ago. Economists suggest these declines reflect the long-term effects of pandemic-related efficiency improvements rather than broader economic troubles.
Port Strike Suspended, But Automation Debate Looms Large in Longshoremen Negotiations
Automation is a billion-dollar question as ILA and USMX sign a tentative agreement to suspend the strike for at least three months. However,? stakeholders and experts are keen to know how automation remains a major unresolved issue. While the two sides have agreed on a wage increase, the ILA is firm on tightening restrictions on port automation, which it opposes strongly.?
Automation has become a contentious point, with the union warning it threatens longshoremen's jobs. Negotiators have three months to finalize the deal, and there are concerns that failure to address automation could lead to another strike in January. ILA President Harold Daggett and his son, Dennis, have both vocally opposed automation, calling it a job threat. Despite the efficiency automation brings to ports, the union insists that maintaining human jobs is paramount.
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