Freight Forward: Reaching an Agreement

Welcome to Freight Forward, where each Monday, I’ll recap what happened in supply chains the previous week through JOC.com articles and additional sources and also what to expect for the week ahead.

I’m Cathy Roberson, a supply chain writer, and researcher. For this weekly series, I serve as a research analyst for the Journal of Commerce (JOC), for whom I identify trends, provide thoughts and input into stories and assist with parcel last-mile queries.

This year appears to be the year of labor contracts as a number of carriers and providers negotiate union contracts that were either delayed due to the pandemic or are set to expire this year.

The longshore workers on the US West Coast secured a 32% salary increase over the life of a tentative six-year contract last week, but they did not receive the increased manning for conventional terminals they sought during the 13-month negotiations with employers. The PMA and ILWU have now entered the ratification phase of the contract process. Leaders from each organization will discuss the details of the tentative agreement with their respective memberships, and then the 70-member PMA, and the ILWU, with more than 20,000 rank-and-file members, will vote to ratify the deal. Based on past contracts, the process usually takes about three months, which would push ratification into the early fall writes Bill Mongelluzzo.

While the ILWU/PMA tentative agreement is good news for all, Peter Tirschwell writes that the agreement may lure back some of the cargo lost during 13 months of negotiations, but changing trade patterns and increased competition from ports along the East and Gulf coasts could mean the end of the West Coast’s dominance. “We are seeing a de-leveraging of trade between the US and China,” Jeremy Nixon, chief executive of Ocean Network Express, told the recent Capital Link Singapore Maritime Forum, touching on a topic rarely discussed by container line CEOs. “Many companies in the US are looking to reduce ... the amount of imports they have ... coming from China.” The West Coast’s share of US imports from Asia has dropped from 71% in 2013 to 56% in the first five months of 2023, while the East and Gulf Coast’s combined share of Asia imports has grown from 29% to 44% during that same period, according to PIERS, a sister product of the Journal of Commerce within S&P Global. 

Other current labor contract negotiations:

• Members of the International Brotherhood of Teamsters working at UPS overwhelmingly voted to authorize a strike. The Teamsters said 97% of its members to voted approved the strike authorization. Such votes are a routine part of contract negotiations and don’t necessarily imply that a strike is imminent, but they do often signal a push to get negotiations over the finish line. The current contract expires July 31. During the negotiations, UPS and the union came to an agreement on new heat safety measures, including changes to UPS’s ubiquitous brown package cars and sprinter vans. Starting Jan. 1, 2024, all new delivery vehicles will have air conditioning. Cab fans will be installed in delivery vehicles as well, writes Bill Cassidy.
• International Brotherhood of Teamsters leadership is endorsing a tentative agreement with ABF Freight System that would give union employees at the LTL carrier a significant pay raise, as well as assurances that ABF won’t deploy driverless technology without the consent of the union. The contract also limits — and in some cases prohibits — the use of technology such as driver-facing in-cab cameras and autonomous trucks. Under the agreement, ABF would need the written consent of the Teamsters to deploy driverless trucks, and even then, the technology could not result in a reduction in union jobs, writes Bill Cassidy.
• The Teamsters Union is asking its members at Yellow to complete a survey detailing their issues with the company, typically a first step toward contract negotiations. Some 22,000 union members at the LTL company began receiving letters asking them to complete the survey by June 26. “The Teamsters National Freight Industry Negotiating Committee is seeking input from Teamsters working at YRC Freight, Holland, New Penn and Reddaway regarding their priorities” for a new or modified contract with Yellow, the union said in its survey notice obtained by the Journal of Commerce. The current agreement with Yellow expires until March 31, 2024. “Just as your company needs your input to be successful, so does your union,” said the survey notice letter writes Bill Cassidy. 

Cold Chain

• Teri Errico Griffis writes that rapid population growth and shifting sourcing is spurring the construction of nearly 2 million square feet of refrigerated storage and distribution facilities around major US Southeast ports. Noting that construction costs for cold storage warehouses are about four times higher than dry cargo facilities, President Todd Jessup of Flexcold predicted development in the Southeast US would continue over the next few years despite a cooling economy. That’s in part because older facilities, particularly those with higher energy costs, may need to be completely rebuilt, rather than renovated, to keep up with an evolving regulatory environment, he said. “You’ve had a lot of food inspections with the USDA and the FDA, and all these things have really changed the whole food landscape in five years,” Jessup said. 
• Ari Ashe writes that Tiger Cool Express, one of the innovators in temperature-controlled domestic intermodal, shut down operations after nearly a decade in business, a victim of weak demand for domestic intermodal and low trucking rates that took away market share. Tiger Infrastructure Partners, the private equity group that owned the intermodal provider, pulled its funding this week, forcing the company to close and putting more than 50 people out of work, a source with knowledge of the company’s operations, who did not want to be identified, told the Journal of Commerce. 

Global

• Importers in the UK have expressed frustration at the high cost and inefficiency of the domestic rail freight sector as pressure to decarbonize heavily polluting transport operations grow. While the rail freight of containers arriving at deep-sea ports is largely smooth, moving smaller volumes of domestic cargo on the rails is neither cost-effective nor efficient, Sally Wright, head of delivery for Nestle UK and Ireland, told the Multimodal 2023 conference in Birmingham. A key factor driving demand for domestic rail freight is decarbonization. Transport is the highest greenhouse gas (GHG)-emitting sector in the UK, with heavy goods vehicles contributing almost 20% of GHG in the country, writes Greg Knowler. 
• Carriers calling on the west coast of India are dealing with major service reliability challenges amid a severe port capacity strain. An abrupt halt of operations at APM Terminals Pipavav over the past two weeks has added to the supply chain pressure that already existed because of the decommissioning of a berth at Nhava Sheva (JNPT) for equipment upgrades, which began in February and will last through the end of August writes Bency Mathew. 

Retail

As US retail sales continue to slow in the first half of 2023, import volumes remain on track for double-digit declines from a year earlier. However, some port stakeholders show increasing confidence in those declines narrowing into the second half of the year. Total US imports hit 2.07 million TEUs in May, according to data from PIERS, a sister company of the Journal of Commerce within S&P Global. Although it was the highest total import volume so far in 2023, the May number was still down 20.4% from the same month in 2022, joining a string of year-on-year double-digit declines since last November. The latest import figures come as the US Census Bureau reported that its advance estimate for retail sales shows scant 0.7% year-on-year growth in May, the second-lowest rate of growth for 2023. The slowdown in sales meant that US companies were barely able to make a dent in inventories. April manufacturers and trade inventories were up 5.2% from a year earlier, the Census Bureau said. The inventories-to-sales ratio also climbed to 1.4 in April, up from a 1.31 reading in April 2022 writes Michael Angell.   

Economic Outlook

• Tuesday, June 20 – US Housing Starts for May
• Friday, June 23 – S&P Flash PMI for June

That’s it for this week. Please be sure to hit the subscribe button to receive the latest updates.

For readers interested in reading more JOC stories, click on CATHYR20 to receive a 20% discount (Note this is for first-time subscribers.).

What did I miss? Have a question? Let me know in the comments. I’ll be checking back throughout the week to answer questions, address comments and share additional insights.

In the meantime, here’s wishing everyone a good freight week ahead!

-Cathy