As negotiations between the International Longshoremen's Association and employers represented by the US Maritime Alliance remain in a stalemate, participants in the US petrochemical markets were mixed on the impact, with some sellers preparing for the worst.
Union members and management sought to discuss issues such as container royalties and payments made to longshoremen based on the weight of containerized cargo, while the USMX sought to cap those payments. Negotiations between the two groups regarding a new contract broke off Tuesday, though union representatives said the union was willing to extend the contract until February 1. The contract expires December 29.
The failure to reach an agreement has some petrochemical participants, particularly those in the polymer export market, on edge.
"I have January booked solid, so it's going to be mayhem if orders don't get out because of a strike," one US polymer trader said. "We are trying to get as much as possible out before December 29, but we have orders for January that can't go out yet. It would be disastrous."
The trader went on to add that it had informed customers that product deliveries could be delayed. That sentiment was echoed by another major US-based polymer producer that said it warned its customers in Latin America that they should expect delays. The producer added that the impact from the strike would result in the company shipping material out of Mexico, which could add as much as two weeks onto existing delivery times.
Should the two parties fail to reach an agreement and ILA employees strike, US chemical sellers looking to export would be forced to either ship material to the US West Coast or ship out of ports in Mexico such as Altamira, Coatzacoalcos or Veracruz.
"We are working, trying to have everything out by the 29th, but it will be hard," said one US polyethylene trader who moves material from the US into Latin America. "The problem will not be for producers, but for traders that [have] already bought product."
One US solvents importer noted that there is potential for big problems, but "there's not much you can do except wait and see."
"You can't not order, because then you've got no product," the importer said. "The best you can do is hope that if something happens it is cleared up quickly."
Still, not everyone deemed the situation dire, with one source noting that talks and deadlines had been extended in similar situations in the past and expecting the two sides to reach an agreement to prevent any disruptions.
The potential for a strike has been ongoing for several months and was averted in September when federal mediators intervened to revive negotiations.
The ILA, which represents approximately 15,000 dockworkers employed at ports on the US East and Gulf coasts, recently rejected a December 10 proposal where USMX offered to guarantee royalties at 2011 levels to all ILA employees who received royalty checks in 2011 for another 25 years.
Joe Curto, USMX director and president of the New York Shipping Association, added that there were still a few more days in the month that the USMX would be willing to continue discussions and emphasized that this was not a "last and best offer," but an offer that employers and the union could continue to discuss.
