Guaranteed Pay Clause Must End at Montreal Port

As the truce settles in between the Employers and Longshoremen at the Port of Montreal, after last week’s lockout, both sides will be contemplating their positions when contract talks resume later this year. The Union has been without a contract since December 31, 2008. At issue is the so called guaranteed pay program for 107 workers which cost the MEA C$ 12 million last year. The program effectively pays the workers even when they are not working. The MEA wants to drastically reduce guaranteed pay. In today’s ultra competitive world of container shipping, the Canadian Union of Public Employees 375 representing the dock workers have to agree to the reduction the MEA is seeking, or risk shrinking the business moving through the Port of Montreal. The greatest threat to the port will likely be the new Melford Container Terminal in the Strait of Casno, Nova Scotia.

The Melford Terminal has been in the planning stage for years now and in October of 2009 overcame a significant hurdle by receiving environmental assessment approval from the governments of Canada and Nova Scotia. The development will include a 315 acre terminal and a 1500 acre logistics park in Melford. The project is 100% private equity funded and, refreshingly, investors are not asking for taxpayer dollars. The project is due to be completed in 2013. Earlier this month, Melford announced an agreement with Maher Terminals to jointly run MIT.

Dan Bordessa of project backer Cyrus Capital Partners LC said that the Maher decision provides immediate credibility. Maher operates a container terminal in New Jersey and the new container terminal in Prince Rupert. Melford has stated on its website that it is modelled after Prince Rupert and aims to be a “Canadian Northeast Gateway.” MITI has set the bar high with its strategic goals

  • Employ state of the art and supply chain technologies
  • Set new standards in North American security practices and technologies
  • Lead the industry in terminal efficiencies for vessel to vessel, vessel to rail and vessel to logistics park transfers. 

Longshoremen at the Port of Montreal ought to be worried. Business moving to the new container port at Melford will likely be drained off Halifax and Montreal. While Montreal’s throughput growth rate in the past five years has been positive (see chart below) with the exception of 2009, Halifax has been steadily losing ground each year since 2005. Montreal’s close proximity to a large population base in South West Ontario along with a quick transit to the Midwest has given the port an advantage over Atlantic Canada for years. However, the port should not get complacent. In early 2009, the port of Charleston, SC lost world number one carrier Maersk Line mostly because of the inflexibility of the ILA.

An article on Jan 23, 2009 in World Trade Magazine explains

“Four weeks after Maersk Line, the world’s largest shipping company, announced it is abandoning service to the Port of Charleston, little progress has been made in getting the port’s largest customer to reconsider, despite extensive efforts by state and local maritime officials.

 
The shipping line, which has been a customer of the South Carolina State Ports Authority since the early 1950s, announced its decision on Dec. 18 after it couldn’t get longshoreman to agree to a cost-cutting plan that would have had its moved by non-union state employees.
   
It also announced plans to move its South Atlantic Express service—which represents 25 percent of its port calls—to Savannah, Georgia, Norfolk, Virginia and other nearby ports.
 
The phasing out of that service—which had been making about 104 calls on Charleston a year—began earlier this month. Maersk said it would fully discontinue using Charleston’s port after its contract expires at the end of 2010….
 
 Shortly thereafter the line said that unless it could find a way to save money using ILA members at the dedicated terminal it operated in Charleston, it would have to switch to a non-union section of the port’s Wando Welch terminal in Mount Pleasant, South Carolina.
 
At the time, ILA Local 1422 president Ken Riley said the request would be in violation of an international contract between labor and shipping companies, and would potentially jeopardize the relationships between Maersk and the ILA up and down the coast. «    

Maersk, like every other shipping line in 2009, desperately needed to cut costs. The Charleston example demonstrates clearly how inflexible union policies can drive carriers to greener pastures. The Melford Terminal in Nova Scotia is a threat to growth in the Port of Montreal. An inflexible union insisting on keeping uncompetitive clauses in the new contract will assuredly drive business away.

US/Canada Ports Throughput 2005 to 2009 (TEU)

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