US Dockworkers Fight for Jobs With Ports Pushing for Automation

Date: Tuesday, June 14, 2022
Source: Bloomberg

With representatives for operators of 29 West Coast ports and the 22,000 dockworkers who man them in talks, a familiar issue is looming over the bargaining table: automation. On one side, more than 70 terminal operators and ocean carriers represented by the Pacific Maritime Association (PMA) have long pitched modernization as a cure for global trade frictions such as the ones that led to shortages of everything from hospital gloves to air-conditioner parts over the past two years. Facing off against them is the International Longshore & Warehouse Union (ILWU), which claims that relying more on machines than on human workers will further boost companies’ profits while killing well-paying union jobs.

The two sides have been having the man-vs.-machine debate for at least six decades. But the current negotiations are drawing particular attention after pandemic-era supply chain chaos highlighted just how important efficient port operations are to the nation’s economic well-being.

“We’ve been living for decades with a supply chain that was just waiting for a black swan event to show its weaknesses and the cracks in the overall process,” says Stephanie Loomis, vice president for international procurement at freight forwarder CargoTrans Inc.

The US gateways for trade have been operating at peak capacity, handling record volumes for almost two years. They’re among the world’s least efficient, with supply snarls pushing the nation’s largest ports, in Los Angeles and Long Beach, Calif., to the bottom of the World Bank and S&P Global Market Intelligence’s 370-member Container Port Performance Index for 2021. The index, released in May, bases its ranking on such metrics as the average number of minutes it takes to unload a single container and the total number of hours a ship spends in port to complete delivery of its cargo.

Some port operators view automation as a solution. Despite big upfront investments, the introduction of such innovations as software-assisted cranes, autonomous vehicles, and digital checkpoints promises to reduce labor and operating costs and make the overall process more efficient. “That’s the key to long-term survival, long-term competitiveness,” PMA President Jim McKenna said in an interview before the West Coast talks started on May 10.

Such a transition would be costly. Part of the money would come from governments swayed by estimates such as the American Association of Port Authorities calculation that the nation’s more than 300 seaports contributed $5.4 trillion to the economy before the pandemic began, generating about a fourth of the country’s gross domestic product and supporting almost 31 million jobs. The federal infrastructure package passed in 2021 has promised $17 billion for ports. In addition, US ports and their tenants plan to invest almost $33 billion annually by 2025, according to the AAPA.

“The ultimate question for port and terminal operators will be whether or not to absorb a short-term financial hit to pursue a large strategic goal,” says Julie Gerdeman, chief executive officer of supply-chain risk analytics firm Everstream Analytics, referring to spending on automation.

Moreover, there’s no guarantee that investing so heavily on mechanization will be successful. When done right, port automation can reduce operating expenses by more than a third, according to a 2018 McKinsey & Co. report. Yet the same study found that these terminals tend to be as much as 15% less productive than traditional ones, with automated cranes oftentimes unloading fewer containers per hour than those operated by humans, for example.

Even after investing billions of dollars to optimize their activities, terminal operators still struggle with specialized labor shortages and the lack of data availability and integration within their operations. “With numbers like these, automation can’t overcome the burden of the upfront capital expenditures,” the McKinsey report concluded.

Only 4% of the world’s container terminals were automated as of last year, according to the International Transport Forum, an Organization for Economic Cooperation and Development think tank. In Asia and Europe, about one in five terminals are at least partially automated. At least four US ports have some automated terminals, including Los Angeles and Long Beach, which handle about 42% of all U.S. containerized trade with East Asia.

Curbs on using public funds for port automation could cloud the issue. To prevent the “loss of good jobs or reduction in the quality of jobs within the port,” the $450 million allocated so far from the federal infrastructure bill can’t be used to fully automate operations. This rule also applies to the more than $230 million Congress sends to seaports every year. States including Washington go as far as to prohibit the use of public funds to purchase fully automated cargo handling equipment.

This in part reflects pressure from the ILWU, which hasn’t forgotten how agreeing in the 1960s to the use of labor-saving technologies in exchange for a pension fund and other benefits forever changed the nature of longshore work. Led by the introduction of the shipping container, mechanization drastically reduced turnaround rates while displacing thousands of workers. To try to reverse some of those concessions, ILWU members conducted the longest strike in US longshore history—130 days—a decade later. They failed. “That had profound consequences on the workers and, therefore, on the union that they are a part of,” says Peter Cole, a labor historian at Western Illinois University.

The union hasn’t gone on strike since and has increasingly made concessions related to automation. A 2002 deal introduced technologies such as scanners and character-recognition technology, while a 2008 pact explicitly authorized automation. Still, when Total Terminals International LLC announced its intention to automate its Long Beach operations to make it the fourth automated terminal at the complex in May 2021, the union strongly opposed it. “The bottom line is that automation has destroyed longshore jobs,” says Frank Ponce de Leon, ILWU coast committeeman.

TraPac LLC invested $510 million to modernize its Los Angeles operations over the past decade, with the insertion of automated stacking cranes and straddle carriers allowing the terminal to handle twice as much cargo. Former CEO Stephen Edwards now heads the Port of Virginia⁠—already the country’s most efficient trade gateway⁠—where he’s working to partially automate operations. Following the expansion of the Panama Canal in 2016, which allowed larger ships to reach the Atlantic Coast, the Port of Virginia invested $217 million in almost 90 automated cranes, with the goal of doubling the port’s capacity. “When we’ve gone through the supply chain issues—we had ships being off-schedule, imports changing, exports changing constantly—the automation and the modernization of the stacking cranes allows us to be very nimble, very agile,” Edwards says.

Other, less-wrenching changes might offer some relief to overstretched ports, however. Long Beach Executive Director Mario Cordero points out that all of the most efficient ports in the world operate around the clock, but only a few are automated. “We need to get there first,” Cordero says.

At the peak of the crisis last year, California’s twin ports announced they would be moving to 24-hour longshore operations and would extend gate hours for truckers. A pilot program was started before the pandemic, but the shift took on urgency over the past two years. The initiative President Joe Biden praised as “a sign of major progress” hasn’t shown many results: Only one terminal is currently operating round-the-clock. Still, Cordero expects more stakeholders to embrace the initiative “in the years to come.”

Turloch Mooney, associate director for S&P Global Market Intelligence, says that what US ports need at this point is a holistic approach that prioritizes improved data-sharing and collaboration, addresses intermodal and warehouse capacity, and makes sure ports are operating around the clock to match their counterparts in Asia. “Just focusing on the automation and the labor issue is not enough. It needs to be a bigger strategy,” Mooney says. “Automation certainly isn’t a panacea, and it’s not going to solve everything.”


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