Executives at the ports of Los Angeles and Long Beach exhaled Thursday, Sept. 15, when national railroad and labor representatives announced a tentative deal to avert a potential work stoppage that officials said would have wreaked havoc on the already stressed supply chain.
Railroads are one of the key aspects of the complex and nuanced supply chain – which also includes ports, ocean carriers and trucks, among other industries – that takes imports from overseas to store shelves.
But revelations on Wednesday of a possible strike over labor negotiations threatened to deal a blow to a supply chain still struggling to recover from a pandemic-era cargo boom that nearly crippled it.
And even though efforts to shore up the supply chain have progressed, the railroads have become a blemish lately.
Spikes in cargo volume since spring have led to serious bottlenecks at rail facilities in the nation’s interior, said Port of LA Executive Director Gene Seroka.
Rail facilities in Chicago, Dallas, Kansas City and other cargo hubs are jammed, much like port terminals were last year when record high volumes of cargo sat on anchored ships awaiting pickup.
Had rail and labor officials not been able to reach a deal, LA and Long Beach port officials said, the strike would have worsened those already fraught conditions.
“This is great news for our nation’s supply chain and all Americans,” Seroka said during his monthly news briefing on Thursday. “Rail plays a vital role at the Port of Los Angeles — but there is much more work ahead. Rail has been challenged for months.”
Negotiations involving more than 30 of the nation’s rail companies — including Union Pacific, BNSF Railway Company and the Los Angeles Junction Railway Company — and 12 labor unions representing about 125,000 employees had been ongoing for months.
The tensions eventually spurred President Joe Biden to create an emergency panel to mediate the contract talks.
That seemed to help.
Moments ago, following more than 20 consecutive hours of negotiations at @USDOL, the rail companies and union negotiators came to a tentative agreement that balances the needs of workers, businesses, and our nation’s economy. (1/2)
— Secretary Marty Walsh (@SecMartyWalsh) September 15, 2022
Nine of the 12 unions eventually agreed to tentative terms that included a 24% wage hike retroactive to 2020.
But lingering disputes over time-off policies reached a fever pitch on Wednesday, when one union rejected that tentative contract — and authorized a work stoppage days ahead of Friday’s strike deadline.
The International Association of Machinists and Aerospace Workers District 19 set off panic about what a strike would mean for the nation’s supply chain, though the 4,600 locomotive machinists, track equipment mechanics and facility maintenance personnel IAM represents also voted to delay any strike until Sept. 29 to allow more time for negotiations – and to allow other unions to vote.
Two other key unions, meanwhile, held off on voting whether to accept the initial deal.
That prompted White House officials to step in, primarily Labor Secretary Marty Walsh, who led a 20-hour negotiating session.
Walsh, along with union and freight leaders, announced on Thursday that all parties had reached a tentative agreement — putting an end to concerns about the potential strike.
The new agreement — which still needs to be ratified by union members in the coming weeks — would increase worker wages by 24% over five years, retroactive to 2020, including an average payout of $11,000 per worker upon ratification.
And, according to a Teamsters statement, the new contract includes more flexible time-off provisions.
Seroka and his Long Beach counterpart, Mario Cordero, who represent the two busiest ports in the nation, welcomed the news – especially as retailers get ready for the holiday shopping season.
“The San Pedro Bay port complex moves 40% of the nation’s cargo, and almost 30% of U.S. freight moves by rail,” Cordero said in a Thursday statement. “It’s not difficult to see what an interruption of service during the critical peak shipping season would have meant both here and for the greater national supply chain.”
There will still be some nationwide cargo disruptions, however, because of this week’s potential strike news, Seroka said.
While he didn’t detail how, the supply chain is so intricate that any blip in efficiency could disrupt cargo movements.
“But we’re working with stakeholders,” Seroka said, “using data through our Port Optimizer system, and continuing to stay close to all parties to make sure that any disruption is minimized.”
The ports don’t need any other challenges – especially after a two-year cargo surge that has regularly broken records.
POLA, in fact, broke a Western Hemisphere record for cargo in 2021, and last month was the first time this year it hasn’t broken a monthly cargo record. POLA moved 15% less cargo in August than it did during the same month in 2021.
The Port of Long Beach has yet to release its August statistics, but has also regularly broken cargo records since the second half of 2020.
The cargo surge nearly overwhelmed the LA and Long Beach ports — and the supply chain in general — in 2020 and much of 2021, with ships lining up as far as south Orange County, containers piling up at the ports, and trucks waiting for days outside overflowing Inland Empire warehouses.
But the San Pedro Bay ports, officials there have said, have worked to reduce supply chain inefficiencies and reduce cargo bottlenecks across the board.
A record 109 ships awaited entry into the ports in January, for example.
On Thursday, that number was down to 11.
Trucks are also moving cargo more quickly, Seroka said, dwelling an average of 3.7 days — far off last year’s peak of 11 days.
“We’ve nearly eliminated vessel backlogs, improved truck dwell times, and are now using data more effectively than ever before,” Seroka said. “As a result, we’re more fluid and have the capacity to handle additional cargo here in Los Angeles.”
But now rail cargo is backed up.
The Port of LA, in fact, has seen a sixfold increase in rail cargo volume since February, Seroka said.
And with rail hubs in the heartland clogged, train-bound import containers are piling up in LA and Long Beach.
Rail cargo is now waiting an average of 7.5 days to get on a train, Seroka said, more than four times POLA’s normal dwell time. On Thursday, there were about 28,000 rail containers waiting for transport — a number that typically sits around 9,000 units.
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“Cargo owners need to pick up their boxes faster in the interior — with that we can load cargo onto these trains and get them out of Southern California much more quickly,” Seroka said. “Getting those import containers off and into the domestic economy is key to improving rail flow at U.S. ports.”
The port also has upwards of 17,000 cargo containers waiting upwards of nine days to get moving, Seroka said.
The Port of Long Beach, meanwhile, has seen improvements recently, with rail cargo waiting an average of 11 days across its terminals, said POLB spokesman Lee Peterson — down from 13 days three weeks ago.
“Under normal conditions, that number should be zero,” Seroka said. “There’s still much more work for all of us to do.”
The rail carriers, port officials have said, are dealing with a lack of equipment, such as chassis, which the train companies have also acknowledged.
Many of the 45,000 rail employees laid off during the coronavirus pandemic, meanwhile, haven’t returned — and quickly training new hires has been challenging, rail workers said during an August town hall.
Officials for the two biggest rail carriers operating out of the L.A. and Long Beach ports — Union Pacific and BNSF —have said their companies are working to hire more employees and add equipment.
A work stoppage, however, could have derailed progress — and crippled a critical piece of the supply chain.
But that appears to have been avoided.
“With today’s announcement of the tentative agreement,” Seroka said, “everyone can now shift their focus back to the work on the ground.”