Logistics Industry Faces Supply Chain Disruption as Labor Contract Negotiations Intensify

As mid-June approached, the logistics industry grappled with the looming threat of significant supply chain disruptions. Labor contract discussions between major players, such as UPS and the Teamsters union, had beneficial cargo owners anxiously awaiting updates.

Meanwhile, on the North American west coast, tense negotiations between port labor and employers raised concerns about potential work stoppages in both the US and Canada. This marked the first time that west coast ports from Prince Rupert to southern California faced the simultaneous risk of disruption. Additionally, the Panama Canal’s imposition of draft restrictions on container ships due to drought added to the challenges.

Labour unions demanded substantial pay increases, arguing that carriers should share their recent windfall profits with workers who faced health risks and navigated through lockdowns and congested facilities. Not limited to container terminals, logistics firms, including United Airlines and FedEx, faced demands for higher wages. These incremental labor costs, along with other inflation-driven increases, are likely to be passed on to customers, causing cargo owners to express concerns about unsustainable supply chain expenses.

The industry has observed a shift from express to deferred modes by parcel carriers and a redirection of traffic back to the fastest and most cost-effective transpacific routes by shippers who had previously diverted away from US west coast ports to avoid potential disruptions.

Airline load factors have reflected sluggish demand, with industry-wide load factors dropping 9.2 percentage points year-on-year to 42.7% in April, and load factors in the Asia Pacific region experiencing an 18.5 percentage point decrease.

The East-West Airfreight Price Multiplier by Drewry Maritime Research saw a surge from a factor of 5.5 in July 2022 to 19.3 in April, highlighting the significant price differential between ocean and airfreight. Forecasts for the upcoming peak shipping season remain tepid, suggesting a minimal surge at best. Unless faced with major disruptions, air carriers are likely to struggle with raising prices in line with their rising costs, reports Putzger of aircargonews.net.