Now that the International Longshoremen (ILA) have agreed to continue working through January 15, 2025 it will give the ILA and the United States Marine Alliance (MSMX) time to complete a longer term contract. The issue of a pay raise seems to have been settled and ILA workers will receive a very generous 62% pay increase over the next six years. Unfortunately, the most important issue, to the U.S. economy, is still an open ended question. And, that is the question of port automation.
Seaports and maritime operators generate an estimated $5.4 trillion in economic activity annually. Needless to say, millions of people beyond the 50,000 ILA members depend upon port throughput for their jobs. Some U.S. exports and imports are shipped by rail, air or truck. However, 41% of total exports and 47% of imports (measured in value) move by water.
Two-thirds of maritime cargo is shipped through containers, the ubiquitous 20, 40 and 45 foot steel boxes that are the lifeblood of global commerce. In 2022, at the height of Covid lockdowns U.S. port container throughput peaked at 62 million containers - up around 13% from the years preceding pandemic restrictions. This explosion in container volume revealed fault lines in American port capacity and productivity. Port congestion peaked in February, 2022 when over 150 container ships were idly waiting to dock and unload their cargo at U.S. ports.
It is projected that by 2040 U.S. ports will need to increase throughput to around 100 million TEU – over a 60% increase in less than 20 years. Obviously, port capacity will have to increase dramatically to meet this demand or it will have a negative impact on economic growth. Having 150 container ships waiting to unload was unacceptable. Do we really want to see what 200 or 250 would look like?
Land and geographic constraints make it almost impossible to significantly increase the size of existing ports, or to build new ports. The only solution is to optimize current port operations. But, the ILA demand that ports not increase automation will preclude the necessary automation to achieve the necessary port capacity.
The ILA’s position is unfortunate. American ports are some of the least productive in the world. According to the Container Port Performance Index, out of over 400 ports ranked, the top U.S. port is the Port of Charleston, ranked at only 53. The largest U.S. ports, as measured by container throughput, Los Angeles and Long Beach rank 373 and 375 – making them some of the least productive ports in the world. Clearly, in the short term, American ports need drastic improvement if American ports are going to keep up with U.S. economic needs.
Over a longer time horizon, the U.S. economy always finds a way to expand. Protecting industries from competition or automation is never a long term fix for an industry or its workers. The ILA’s anti-automation position could very well mean that, in the near future, an Elon Musk of freight transportation could find a way to avoid American ports. Having a 100% market share of a declining industry would not be good for U.S. ports nor the ILA. Let’s hope the ILA keeps future dock workers in mind and agrees to the optimization measures needed to bring U.S. ports up to world class standards.
