West Coast ports face backlog after dispute

Feb 23, 2015, 4:04 PM EST
SAN FRANCISCO, CA - FEBRUARY 20: A container ship travels through the San Francisco Bay enroute to the Port of Oakland on February 20, 2015 in San Francisco, California. Members of International Longshore and Warehouse Union (ILWU) from 29 West Coast ports are continuing contract negotiations with terminal operators in hopes to come to an agreement in the near future. The ILWU members at West Coast ports have been without a contract for 9 months.
Justin Sullivan/Getty Images

The CEO of the Port of Long Beach said on Monday that it will take West Coast ports two months to clear the backlog caused by a labor dispute that was finally resolved on Friday. "It's an amazing congestion problem. It is epic proportions from our perspective," Jon Slangerup said in a "Squawk Box" interview, according to CNBC. A group of shipping companies and the powerful dockworkers union reached the tentative deal on Friday after nine months of negotiations, settling a dispute that disrupted the flow of cargo through 29 U.S. West Coast ports and snarled trans-Pacific maritime trade with Asia. West Coast dockworkers are likely to approve the new contract after a committee that represented them unanimously approved the terms of the deal, U.S. Labor Secretary Thomas Perez said on "Squawk Box." Slangerup said he was grateful to Perez, whose involvement made the difference in reaching an accord. He added that the deal should head off the chance of disruptive disputes arising in the near future.

A tentative labor agreement involving 29 ports was announced late on Friday involving 20,000 dockworkers, Reuters reports. Tensions over their lack of a contract since July had led to chronic cargo backups. But port officials and companies warned it will take time to restore a normal flow of traffic. "It's not going to be fast," Slangerup told CNBC television. "It's going to take us a couple of months to dig out, but we were at full strength on Saturday night, all full strength yesterday, and we're going to stay at it until this backlog is cleared."

In 2002, a 10-day lockout involving the same groups cost the U.S. economy an estimated $1 billion a day, and it took two to three months to return to normal, noted the Wall Street Journal. This time, while the labor dispute never resulted in total port shutdowns like a lockout, the slowdowns were spread out over a longer period. They began roughly in November as the union stopped sending enough workers and increased in January and February as employers cut evening and weekend shifts. Port and logistics experts estimated it could take anywhere from about two to six months to get the U.S. supply chain—which makes sure T-shirts end up on shelves and auto parts are available for manufacturing—back on track.

A number of industry groups—including the National Retail Federation, the American Apparel & Footwear Association and the Agriculture Transportation Coalition—called for a quick ratification of the agreement, while cautioning that this type of disruption can’t be allowed to happen again. Nearly 50% of all clothing and shoes are imported to the U.S. via the ports of Los Angeles and Long Beach, the American Apparel & Footwear Association said. “This dispute has left a damaging effect on our industry—causing extreme delays and millions in lost sales,” the association added.