Why the ILA will strike

As just posted, I think the ILA will go on strike Dec. 30.  At the moment both sides
are meeting with a mediator, but in my opinion, the most that will happen is the contract
will be extended.

If they do this, it is only postponing the strike.   I don't think the ILA will give in.  They want
to continue some stupid payments that were put in place to appease the union when containerzation
came in to place so the union members loaded big containers (you all know what an ocean
container looks like), rather than bags and boxes.

This took place in the 1960's.  That is more than 50 years ago!!

In my opinion, the ILA management is totally out of touch with reality.  Within the last
few years it has been shown there is still mob control of the union, with "Christmas payments"
being made by the membership to the union bosses.

The union bosses need to be replaced.   Only when this occurs will a reasonable contract
come in to place, and the ports and carriers can move forward with needed improvements.

Just saying...

Plan for strike Dec. 30 at U.S. East/Gulf ports.

I think the ILA will strike, and according to Bloomberg, the general belief is Obama will not
intervene (at least in the short term).   The strike will begin Sunday, Dec. 30.

All of the carriers have filed a strike surcharge, so it is the importers and exporters who
will help foot the bill for the additional costs.

The winners will be the railroads, and truckers, who will be moving the cargo from the U.S. West Coast
or Canada to the final destination.

From Bloomberg (click here for link)

President Barack Obama is facing pressure to block a strike that would gridlock eastern U.S. ports and risk damaging industries from retail to manufacturing.
Federal mediators have been pushing for a deal between dockworkers and their employers before a Dec. 29 deadline. Talks between the International Longshoremen’s Association and the U.S. Maritime Alliance broke down last week amid a dispute over container royalty fees, levies that supplement wages.

A dockworker walkout would be the first at East Coast and Gulf Coast ports since 1977, and would halt shipments of containerized cargo, including clothing, frozen foods and car parts. Photographer: Ken James/Bloomberg

1:31

Dec. 27 (Bloomberg) -- Sheila Dharmarajan reports on the possible strike by the International Longshoremen's Association that would stop the unloading of shipping containers in New York. She speaks on Bloomberg Television's "In The Loop."

4:23

Dec. 27 (Bloomberg) -- Matthew Shay, chief executive officer of the National Retail Federation, talks about the possibility that U.S. lawmakers will reach a budget agreement before Jan. 1 and avert the so-called fiscal cliff of tax increases and spending cuts. Shay also discusses a possible strike by U.S. dockworkers and the outlook for U.S. retail sales. He speaks with Erik Schatzker on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

A walkout would be the first at East Coast and Gulf Coast ports since 1977, and would halt shipments of containerized cargo, including clothing, frozen foods and car parts. Obama would be left to choose between forsaking a pro-labor stance by invoking the 1947 Taft-Hartley Act and allowing a union action that could compound the effects of the fiscal cliff.
“To throw that kind of a strike on top of the economy right away in January, I’m sure is something the administration would rather not see,” Mike Asensio, a labor lawyer at Baker Hostetler LLP in Columbus, Ohio, said in a telephone interview. “Would it create that much of a nightmare for him that they would be willing to do something that would anger part of their constituency in organized labor? That’s the $64,000 question.”
Matt Lehrich, a White House spokesman, declined to comment beyond a statement last week that the administration was monitoring the situation and urging the parties “to continue their work at the negotiating table to get a deal done as quickly as possible.”

Salvaging Talks

The Federal Mediation and Conciliation Service, which has guided talks since September, organized a meeting between the two sides this week in an 11th-hour effort to salvage negotiations. All three parties declined to provide further details on the new talks.
“I believe in my president, and I will follow him down whatever road he leads us,” Carl Chiofolo Jr., a union member and clerical worker at New Jersey’s Port Elizabeth, said in a phone interview. “Solidarity is the No. 1 thing here. We have to keep together on this. It literally is a fight for our lives.”
If federal mediation fails, the only remaining tool in the government’s arsenal is Taft-Hartley, which empowers the president to intervene in strikes that are deemed national emergencies, said Phillip Wilson, president and general counsel at the Labor Relations Institute in Broken Arrow, Oklahoma.
The act was last invoked by President George W. Bush in 2002 after a lockout closed West Coast ports for 10 days. The most recent successful use prior to that was in 1971 under President Richard Nixon.

Retail Pressure

The National Retail Federation and Florida Governor Rick Scott have urged Obama to use the law to avoid an eastern port shutdown that they say would cripple an already weak economy.
“The threat to national health and safety that would result from mass closure of the ports cannot be overstated,” Scott, a Republican, wrote in a Dec. 20 letter to Obama. “The Taft-HartAct provides your administration with tools that can help avoid this threat.”
On a conference call with port directors today, Scott said he hasn’t yet received a response from Obama and reiterated his call for an intervention. About 550,000 people depend on Florida ports directly and indirectly for their jobs, he said.
The Port Authority of New York and New Jersey said a strike would cost the region an estimated $136 million a week in personal income and $110 million in economic output.
“Any disruption to port activity will negatively affect tens of thousands of local jobs as well as both the regional and the national economies,” Steve Coleman, an authority spokesman, wrote in an e-mail. “We urge the parties to resolve their differences as soon as possible.”

Labor Support

Even as pressure for action mounts, Obama may hesitate to undermine the union’s bargaining power, Bradford Livingston, a partner at Seyfarth Shaw LLP, said in an interview from Ch


Labor unions “continue to be one of the bigger donors of the Democratic Party,” Livingston said in a phone interview. “As the top Democrat, even though he may not be re-elected, he’s going to want to be a friend to organized labor for the next four years.”
The Longshoremen’s political action committee gave 96 percent of its $549,050 in 2012 election donations to Democratic candidates and committees, according to the Washington-based Center for Responsive Politics. Obama didn’t accept PAC contributions for his re-election campaign.

West Coast

Calls from the Retail Federation for presidential intervention during an eight-day strike last month at the Port of Los Angeles and adjacent Port of Long Beach went unheeded. A strike at East Coast and Gulf Coast ports would need to last at least as long or longer before Obama steps in, according to the Labor Relations Institute’s Wilson.
“The president intervening is a big deal,” he said in a phone interview. “At the end of the day, the way these situations are supposed to work out is the parties inflict whatever pain they can on each other and then they reach a deal.”
Still, with the fiscal cliff of more than $600 billion in spending cuts and tax increases looming at the end of the year, the president won’t be able to linger on the sidelines, said Jock O’Connell, international trade adviser at Los Angeles-based consultant Beacon Economics LLC.
“There’s always the possibility that the mediators will lead the respective parties to come to a solution before the strike,” O’Connell said in a phone interview. “After that, then the clock starts ticking. The precedent in this case is about a 10-day clock before pressure on the White House to invoke Taft-Hartley starts becoming irresistible.”

ILA issues...are they out of their #%@? minds?

From the ILA web-site... click here for link     International Longshoremen's Association, AFL-CIO Contract Issues with United States Maritime Alliance

12/20/2012

THE ISSUE: CONTAINER ROYALTY
International Longshoremen's Association, AFL-CIO wants to maintain Container Royalty Fund as it is in current contract. USMX, the employer group representing ILA employers, wants to put a cash ceiling or CAP on how much money is put into the Container Royalty Fund for current longshore workers and ultimately, eliminate the Container Royalty Fund.
The first container royalties were established in the 1960s as a way to protect members of the International Longshoremen's Association, AFL-CIO (ILA) in New York from job losses created by containerization and its introduction of automated cargo.
Container Royalty came about from negotiations and sacrifices made by ILA members since the late 1960s. Container Royalty supplements the members' income and keeps his benefits package financially strong. Container Royalty eligibility must be earned by an ILA member reaching a certain amount of hours worked each year. ILA work isn't like other professions: no ships mean no work, but employers depend on a strong and skilled workforce when ships need to be worked. Container Royalty helps keep an ILA workforce available.
When containerization started the ILA was faced with a huge displacement of worker whose jobs were eliminated by the ominous steel boxes. The ILA was at a crossroad - allow containerization to be implemented or refuse. The ILA agreed to allow containerization to flourish but negotiated a fee based on the weight of each loaded container to be used for annual payments to the longshore workers whose job opportunities had been compromised due to containerization. As the number of containers being handled increased, the negotiated payment for each worker increased. Rather than being an annual bonus for each worker, as USMX suggests, this payment is compensation for the job opportunities lost by permitting containerization.
United States Maritime Alliance now wants to limit the amount of money that is paid ILA members and goes into various Container Royalty Funds by placing a CAP on the money collected in any given contract year. Container Royalty is collected by the amount of tons of containerized cargo ILA members handle. A total of $4.85 is collected on each ton of containerized cargo handled and is distributed to ILA workers as part of a Wage supplement and to the ILA members' health care fund, called MILA.
USMX ultimate goal is to eliminate Container Royalty, based on their last proposal to end it in 25 years.
ILA has suggested a way for Container Royalty to end now. If the Carriers don't want to pay Container Royalty, then bring back all the warehouses, and start stuffing and stripping again. A Carrier does not have to pay Container Royalty on a Container that has been stuffed and stripped by the ILA.
Automation continues to reduce the number of hours for hard working ILA members. Container Royalty wage supplements are more important today for ILA members than its ever been to keep America's commerce moving with skilled, trained longshore workers.


WAGES:
ILA and USMX have exchanged proposals and demands regarding on Wages based on a tentative six-year contract. The ILA has put in its demands wage increases that are reasonable and would enable our employers to remain competitive.
In its contract proposals to the ILA, USMX continues to treat ILA workers like second-class citizens. In all its public pronouncements on wages, USMX fails to note that longshore labor cost amounts to between 3% and 4% of the shipper's total cost. Unlike other hourly workers who work a 40-hour workweek, most longshore workers make themselves available for work on a daily basis. Early on, the ILA negotiated a guarantee of a day's pay. Otherwise, the employer had no obligation to pay if a vessel did not arrive on schedule. To the employer's benefit, Guarantee Annual Income no longer exists.
Also very important to note: For over 20 years, our employers enjoyed paying tiered wages where newer longshore workers were paid much less than their senior counterparts. The system was unfair and there was never light at the end of the tunnel. History shows that management enjoyed huge savings while ILA members, their locals, the Districts and the International all suffered with reduced revenues.


ILA HEALTH CARE FOR WORKERS:
The ILA's National Health care program is called "MILA"
Part of MILA is funded through Container Royalty money mentioned earlier.
USMX current proposal is that our MILA fund is so solvent that they'd like to defer payment of CR 4 for two years. USMX views this as a loan, promising to pay it back within third year of agreement. Their math is fuzzy. They claim CR 4 contributions down the road will be greater than the current $1.15. We think their contributions would end up being less with even a 5% bump in container growth.
USMX pledged early in negotiations that no matter what we agreed to with MILA, our fund would be sound and secure because they'd automatically pump money into the fund if the current $800 million reserve were to fall below $600 million. They called it a trigger and that it would kick in when the fund went below $600 million. CR-4 would restart.
Somehow, talk of a "trigger" has stopped. Their new formula? They only want a 6-month reserve with no trigger. That formula would take our current $800 million reserve down to the $200 million mark.
They will "Guarantee" the current benefit for the life of the contract if we agree to that two-year deferred payment to CR-4. The ILA asks "What reserve will we have at the end of a contract with this formula?" We are unsure about the impact from OBAMACARE.
ILA refuses to jeopardize the future of our MILA program by shortsighted decisions. Healthcare is extremely important to our members and their families and we want it financially secure.


OTHER ISSUES:
ILA and USMX did reach tentative agreements on automation and container chassis work and on some jurisdiction language.


LOCAL ISSUES:
All local issues and negotiated in the local port area. All ILA ports from Maine to Texas still need to resolve local agreements.

Hamburg Sud and Hapag-Lloyd

 Here is the official press release- notice it doesn't say much, and also notice the official name of Hamburg Sud.

I wonder what name they will have for the merged company.

Merger talks between Hapag-Lloyd and Hamburg Süd

 

Hamburg, 18 December 2012. The Executive Boards of Hapag-Lloyd AG and of Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG (Hamburg Süd), in agreement with their shareholders, are investigating if, and under what conditions, a merger of both companies would be of interest. 

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Watch for U.S. East Coast/Gulf strike

I have thought for some time the ILA will strike, but hesitated to say so.

As I have mentioned before, the ILA is totally out of touch with reality.  They do not want to
"give in" to computerization, efficiencies, etc., because this would mean less jobs for their
members.

They also do not want to give  up "royalty payments", which came about after shipping changed
from break bulk to containers.   How long ago was that?  I doubt many people reading this
ever remember a time of  before containers.

Having said this, the ILA also does not realize that the carriers would probably not be hurt
all that much from a strike.  Sure, some of the smaller ones might, but the big carriers will
find other ways to get the cargo to the customers, and, because it will be due to your strike,
they will pass the costs on to the customers.

With the U.S. economy being slow, it's not going to impact things so much.  Freight rates
have been so incredibly low the last few years paying some additional money to get cargo
won't be a huge hardship.

For the carriers, it might give them a chance to negotiate the new rates at a higher level.

So, what I think will happen is the ILA will go on strike.  They will be out maybe 2 weeks,
they will be ordered back to work by the government, and this will continue for some time.

The rail roads have capacity to move containers from the West Coast to the East Coast,
and it will take a little time to get things organized, but because U.S. Customs allows
clearance electronically (hello- wake up ILA), it's not so difficult to divert cargo as it
was say even 5 years ago.

In a couple of weeks we will see if my guess is right or wrong.

Catch ya then.





 

CMA CGM announces surcharges, and makes a profit

I guess since they can't get the rate increases to stick, CMA CGM has now resorted to imposing
"surcharges" to get additional revenue. 

From The Journal of Commerce

French ocean carrier CMA CGM plans to implement "rate restoration surcharges" from Asia to Europe and Africa in the run-up to the Chinese New Year in January.
Effective Dec. 15, the carrier will impose a surcharge of $575 per 20-foot-equivalent unit from all Asian ports, including those in Japan, Southeast Asia and Bangladesh to the west Mediterranean, Adriatic, east Mediterranean, Black Sea and North Africa. It plans another $350-per-TEU surcharge on the same routes on Jan. 10.
The carrier also will impose a "Panama Canal surcharge" of 150 euros per TEU on its Panama Direct service linking Europe and the South Pacific Islands, effective Jan. 14.

And...from Reuters

* French container shipping group posts Q3 profit
* Still profitable in Q4 despite easing freight rates
* Expects bank deal in January on new debt terms
PARIS, Nov 20 (Reuters) - CMA CGM, the world's third-largest container shipping group, said on Tuesday it was on course for a full-year profit and expected to finalise a debt restructuring deal with banks in January.
The French family-owned firm has been through a turbulent three years in a freight sector under pressure from a weak global economy and oversupply of ships.
Volatility in freight has also led A.P. Moller-Maersk , owner of the world's largest container shipping firm, to cut its exposure to this business.
CMA CGM, based in the Mediterranean port city of Marseilles, said it was profitable in the fourth quarter after reporting a cumulative net profit of $310 million in the first nine months of the year.
The market was less favourable in the current quarter, however, with freight rates declining in a sign of renewed pressure from overcapacity, Michel Sirat, CMA CGM's finance director, told journalists.
"The fourth quarter won't be as good as the third quarter. It will be positive (in profits) but not as good," he said.
The company has been in talks with its banks over the past year to change its debt terms to take account of earnings volatility.


CMA CGM now expects to sign a deal in January after agreeing an outline for a debt restructuring with its main banks, Sirat said.
The deal would replace some debt covenants linked to core earnings to ones based on its balance sheet, while also rescheduling some repayments, he added.
Sirat said CMA CGM's financial position would be reinforced by an agreement last month under which France's strategic investment fund FSI is to invest $150 million, and Turkish shareholder Yildirim is to invest a further $100 million.
The group is also pursuing asset sales and plans to sell a 49 percent stake in Terminal Link, its container-terminal operator, Sirat said.
The group's previously announced cost-reduction programme had generated $550 million in savings by the end of the third quarter, ahead of a target of $400 million for the full year, the company added.
CMA CGM reported a net profit of $371 million and core earnings of $617 million in the third quarter, it said in a statement. (Reporting by Matthieu Protard and Gus Trompiz. Editing by Jane Merriman)

In my opinion things will continue to be difficult over the next few years, so there should not be too
much cheering over at CMA CGM.

TSA delays rate increases

The Transpacific Shipping Association (TSA) is a not a conference (those are now illegal), but a
"rate discussion agreement".   Carriers who belong to it are allowed to share certain information,
and to discuss certain things regarding rates.   I am not sure what they can discuss, I think just
general things, not about specific customers.

Anyway, the administrator of the TSA keeps trying to "herd cats", getting all the carriers to
go in the same direction regarding rate increases, policy matter (ie; providing chassis), etc.
Of course if the TSA falls apart the administrator and staff will be out of a job, so they are
doing everything they can to demonstrate the need for their existence.

They have just issued new contract guidelines, delaying the previously announced rate increases
for contract negotiations.

Here it is.....

Managing Market Uncertainty

Sustained volatility in the Asia-US cargo market has delayed development of TSA's annual service contracting program for 2012-13. U.S. economic and retail indicators have remained uncertain, but suggest steady, gradual longer-term improvement in the coming year. As a result TSA lines delayed announcing a formal program of revenue/cost recovery guidelines until February 2012.

In the runup to May 1, 2012, when most new Asia-US service contracts take effect, TSA lines have recommended a schedule of interim, across-the-board rate adjustments aimed at restoring freight rates in the trade to roughly May 2011 levels, as a baseline for subsequent contract rate negotiations going forward. Interim increases include:

- US$400 per 40-foot container (FEU), effective January 1, 2012, with proportionate increases for other equipment sizes, for all tariff and applicable contract cargo.

- US$300 per FEU, effective March 15, 2012, for all tariff and applicable contract cargo.

- US$400 per FEU, effective April 15, for all remaining rates below May 2011 levels.

In addition TSA has announced its 2012-13 guideline revenue program, to take effect no later than May 1, 2012 for all carrier tariffs and service contracts.

Member lines have recommended that new baseline rates be raised by a minimum of US$500 per FEU for cargo to the U.S. West Coast, and a minimum of US$700 per FEU for all other destinations. Additional revenue and cost recovery initiatives will be considered later in the year, after a review of market conditions and outlook for the second half of 2012.

Carriers have further reaffirmed the need for 2012 service contracts to apply per formula rate increases for all equipment sizes, and to provide for collection of full, floating fuel surcharges and other applicable cost-based ancillary charges.

Finally, TSA lines indicated that they intend to apply a peak season surcharge (PSS) later in the year, with a duration and at an amount to be determined based on market conditions approaching the traditional summer and fall peak period.

The overall objective is to ensure carrier viability and service stability in a highly competitive and service-intensive freight market, by a) restoring rates to a baseline of a year earlier and then b) building on that platform in upcoming contracts to cover rising costs; to permit reinvestment in services and operations; and to provide a reasonable measure of profitability.

They say a lot more  boring things regarding how they came up with their formulas etc., trying to
convince either the carriers or their customers (or both, I guess), that they are doing a good job.

I presume what has happened is carriers have "broken ranks" on the previous agreed rate
increases and now the other carriers (through the TSA) are giving the impression the offending
carrier can now right the wrong.

What will really happen is all the carriers will try to get as much business locked up before the
new deadline, and then apologize later.

I guess they still haven't figured out it's all about supply and demand.  Rather than talking about
raising rates, they should be talking about decreasing tonnage.