Supplychain Crisis 2.0
What’s Going on With Shipping?
June 3, 2023
In this episode, Sal Mercogliano – maritime historian at Campbell University (@campbelledu) and former merchant mariner – discusses the potential of a new Supplychain crisis brought upon by a breakdown in US West Coast labor negotiations, low water levels in the Panama Canal, the shift of cargo from the West Coast to the East/Gulf Coast, tension between the International Longshore & Warehouse Union and the Pacific Maritime Association, and the increase cost to use the Suez Canal.
#supplychain #westcoast #ilwu #PMA #labor #containership #panamacanal #suezcanal #inflation
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Twitter: @mercoglianos
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Email: mercoglianosal@gmail.com
00:00 Introduction
02:58 Long-Term Shipping Rates Slump
04:54 Profits for Ocean Shipping Lines
07:00 Dry Panama Canal
10:58 Cargo Shifting From West Coast to East/Gulf Coast US
14:45 Tensions Boil Over In West Coast Labor Talks
17:06 Who is the Pacific Maritime Association?
19:04 Suez Canal Increases Tolls
19:31 Will There Be a Supplychain Crisis 2.0?
Container Shipping Industry Faces Unprecedented Slump in Long-Term Rates
Container Shipping Industry Faces Unprecedented Slump in Long-Term Rates
Freightos Baltic Index (FBX): Global Container Freight Index
https://fbx.freightos.com/
Container Shipping Sector First Quarter 2023
https://capitallinkshipping.com/wp-content/uploads/2023/05/1Q23-Container-Shipping-Sector-Quarterly-Results.pdf
https://capitallinkshipping.com/wp-content/uploads/2023/05/1Q23-Container-Shipping-Sector-Quarterly-Results.pdf
The Fed’s Inflation Fight Faces A New Challenge: A Dry Panama Canal
Container Evolution
https://i0.wp.com/transportgeography.org/wp-content/uploads/containerships_evolution2.png?resize=961%2C1024&ssl=1
Gatun Water Indicators
https://evtms-rpts.pancanal.com/eng/h2o/GatunWaterIndicators.pdf
West Coast Ports Losing 1 Million TEUs Per Year to Eastward Import Shift
West Coast Ports Losing 1 Million TEUs Per Year to Eastward Import Shift
The McCown Report – Top 10 US Ports April 2023
https://capitallinkshipping.com/wp-content/uploads/2023/05/Monthly-Container-Volume-April-2023_compressed.pdf
Tensions Boil Over In West Coast Labor Talks
ILWU June 2, 2023 Statement
https://www.ilwu13.com/resources/all-categories/654-06-02-23-ilwu-local-13-statement/viewdocument/654
Pacific Maritime Association: Who We Are?
https://www.pmanet.org/who-we-are/#board-of-directors
Pacific Maritime Association: Membership
https://www.pmanet.org/wp-content/uploads/2022/08/Membership_List_2022.pdf
Suez Canal Increases Toll Surcharges for Ships
37 Comments
They have not had a pay raise since 2021? Worked through covid with no pay raise or essential worker pay? And now they say they don’t deserve a pay raise or back pay? Wow! When you make $25 BILLION in pure profit a quarter, holy shit! The greed of these corporations is literally nauseating. 🤦♂️As always, screw over the blue collar, middle income man!
Interesting. But not likely to have a big impact on pricing to consumers. Manufacturing output has dropped globally leading to lower demand across the logistics sector. Any disruption is only be temporary at this point.
Thanks for the update Sal. Why can't the water from the Panama Canal locks be recovered and pumped back
into Gatun Lake? I say the reason the water in the lake is going down is it takes that much more to fill and drain
the new locks there, right? And of course we all use global shipping. Where do you think all the crap we buy
at Target or WalMart or Home Depot or wherever comes from? Last I heard there was no LAND route from China!
Do we have a Shipping Czar position yet?
Are there still all those ships waiting offshore? Or has that backlog been cleared up?
Shipping rates were down so shipping stock was very under valued. When the economy picks up, and the shipping companies get more business to improve the earnings, the stock may do well. However if the products stop moving the demand for shipping will decrease. If rates are too low, trips get cancelled and orders won't be delivered.
Sal,
COVID provided all of the companies, the links in the chains, the excuse of "shortages"! Realistically, the shortages were really just delays caused by the labor resources falling out of the process for a period of time. Opportunists raise the price of the inventory with the threat of "no more restocking happening" since the labor pressure is theoretically lifted. There are of course some blips still in the mix but the flow is back again… For the end-users, It is waste inherent in the process for the players to blame each other for the problems. It is the core of capitalism to want the prices stay up when the supply (in this case shipping capacity) returns to normal.
Workers get screwed without the power to negotiate by the Unions! They work with what they have, the ability to SLOW DOWN!!! The management holds labor's jobs like a blade at the throat of the worker… In the end they can't get SHIT DONE without the workers!!! It is a game of chicken with peoples lives in an effort to keep the profits up.
The Cargo will be diverted and Ton Miles costs will GO UP!!! Again really another excuse because no one wants to absorb costs. Larger Profits come when the cost went up x% and the pricing goes up (x+y)%.
You are so right!! Inflation is management's best friend when it comes to pulling profits and an excuse to cut out labor, safety, and quality under the guise of necessity!!
The person who signs your check doesnt give 2 fks about you or your family! They dont care of your in pain from repetitive motion. They dont care if 20 years from now you can walk because of all the back breaking work you have done. They dont care if you get cancer in 5 years from the brake dust your exposed to at work. The employer doesnt care if you live in poverty when your so old you cant work anymore. The company doesnt care if your working in safe conditions and have all the tools to be safe. All they care about is the " bottom line" not the "end of the line" for workers. GOD BLESS ILWU ! They not only stand up for their own memebers but members around the world by making the employers pay a living wage for its members!
Let's face it westcoast shipping unions go slow/no show leading to a strike/lockout is going to harm America. This will inevitably lead to introduction of A.I. into repetitive port operations leading to less union workers. That is a plain fact, not a threat. And there will be no stopping of A.I.
Ill just put it this way. Based on an average inflation rate of 6.5% over the last 2 years(since last raise). We need an $8.25 raise July 1st just to be in line with inflation. Just to have the equivalent buying power as we did July 1st 2021. We have been overly nice about this whole situation and that is coming to an end
I hope the panama canal runs dry- West Coast Longshoreman
4:44 "…it's why you saw inflation take off" ok sure maybe as a secondary effect, but friendly reminder, the root cause of inflation is central banks printing money and devaluing pre-existing dollars.
Elephant in the rowboat is China /Taiwan and the South China seas . That could have an effect on sea freight world wide
I have an interesting question that could have an odd angle on this but I seem to remember work being started on an Alaska Siberia rail crossing. I am not sure where this is currently but that could have very interesting reflective influence on shipping in all manners.
If the union workers strike, Biden will force them back to work like the railroad workers. The union will still send pamphlets to their members telling them to vote for Biden in 2024. Because it’s not about the workers, it’s about money and power at the top.
The economy is about to tank. They will soon be luck if they even have a job when shipping stops. Of course WWIII, like during WWII, will ramp things up again when mass military shipping drives it up again. God help us because the future looks very dark.
Great job Sal. Appreciate the detailed coverage, but the best part was when you pulled it all together. Solid insights! G
Why not pump pacific ocean water or Darian gap water into the Panama canal system?
Great channel. Thanks for the info Sal.
Did you just imply that decreased volumes from the lake in question have nothing to do with climate change?
To be fair, it may be agriculture; but don't be that person.
You're better than that.
Edit in light of your subsequent comment: yes, climate change has a direct impact upon the El Niño–Southern Oscillation
Siding with American labor over foreign companies, your really trying to upset CATO 😄
Are there numbers of overall volume to present with the percentages? If overall volume is down larger percentages are meaningless. Same goes with what freight leaves the port via rail vs road…
So what the LA/LB ports worked during covid so did truckers along with medical personnel and others. Its their job and they got paid with bonuses so Suck It Up Sally and don't prove California is not business friendly…
The port here in Charleston, SC is flooded with shipping. Warehousing up I26 as far as you can see. Thank you CA.
Great information.
I think you bring up a little known national security issue. Yet another thing that could be fixed by a US Controlled Merchant Marine.
🤔
You'll like the one about Covid Hero pay
I don’t feel bad for foreign shipping companies that make billions of dollars in profit off of American labor. I don’t care how much the longshoremen make. Whatever it is it’s not enough. Especially with the cost of living and inflation..
The lake levels are falling because of the drop in rainfall because of climate change
I think you mentioned the Jones act in passing while talking about Australia. I've heard the idea of repealing or restricting it from an economist, Peter Zeihan. What are your thoughts about that, how do the positives and negatives compare?
The issues will be ongoing- no longer viable solutions. 🇺🇲🦖☄️
The ILWU should consider itself lucky, highest paid union workers…even the lowest-end office clerks make over $100,000.
THINK outside the Box people they're playing this game on purpose to make profits to drive profits the company's and PMA
You should also add the ila has their contract this year.
The amount of blood sweat and injury to your body as a longshoreman is insurmountable to the wages. I have lost a finger had 5 arm surgeries. Has a load Ed container land in my truck at ship level and lived . I was off work for over 2 years. So that clerk pay will never give me my full life back. Longshoreman is a life not a job. It takes on average 15 or more years to move up in the union. It’s a commitment. A how many holidays did you miss how many family get together. Becoming a longshoreman is a amazing thing but to get there you give up a quarter of your life. Work is not guaranteed ever. Going to the union hall every day and mabee not getting work for the day is always a possibility.
Unions made the middle class in the USA. Just check the history of labor prior to and post unions of the country.