Implications of Potential Port Strike: Updated

Updated, Oct. 1, 2024:

Reuters reports that dockworkers on the U.S. East Coast and Gulf Coast began a strike early on Tuesday, their first large-scale stoppage in nearly 50 years, halting the flow of about half the nation's ocean shipping after negotiations for a new labor contract broke down over wages.

Updated, Sept. 30, 2024:

The Associated Press is reporting that a port strike by 45,000 dockworkers employed at 36 US ports "is all but certain" at midnight, October 1. President Joe Biden has to date resisted calls, such as one from the National Association of Wholesaler-Distributors, to intervene. However, according to the AP, “If a strike were deemed a danger to U.S. economic health, President Joe Biden could, under the 1947 Taft-Hartley Act, seek a court order for an 80-day cooling-off period. This would suspend the strike.”

According to Tony Pelli, director of supply chain security and resilience at BSI Americas, “It may take a couple of weeks to see an impact on the price of goods in the U.S. In some cases, companies may have increased inventory at U.S. warehouses or shifted (to the extent possible) to West Coast ports in anticipation of such an event. However, most are operating just-in-time supply chains to reduce inventory costs, so they likely haven't taken these steps. It’s unlikely that stores have already raised prices, but that could happen fairly quickly following a strike, as West Coast ports do not have the capacity to handle the excess volume. This could lead to a return of the container backlogs we saw at West Coast ports during the pandemic.”

Updated, Sept. 27, 2024: 

“Several ports have already scheduled planned shutdowns of all port operations ahead of the potential strike from the afternoon of September 30, including: Port of Houston, Port of New Orleans, Port of Norfolk and Port of Mobile," said Mirko Woitzik, global director of Intelligence for Everstream Analytic on September 27.  "More will likely send out announcements over the coming days. Shipping lines could revert to a port-hopping strategy in the first week of a possible strike to allow their ships to unload cargo, calling at Caribbean transshipment hubs such as at Freeport in the Bahamas or at gateways in Mexico or Canada.”

Original article, Sept. 26, 2024:

On October 1, it’s likely that 45,000 union workers will go on strike at ports on the East and Gulf coasts. That date is when the contract between the International Longshoremen’s Association and the United States Maritime Alliance will expire.

Griff Lynch, CEO of the Georgia Ports Authority told AP on September 24 that “we should probably expect there to be a work stoppage and we shouldn’t get surprised if there is one.”

Yossi Sheffi, director of the MIT Center for Transportation and Logistics, weighed in as well telling Sourcing Journal that he too thinks there will be a strike. "The sides are too entrenched. The problem with high rhetoric is that you get tied to it. Let’s say you’re a union leader, and you promise them a 100% wage increase—you cannot compromise on 20%. It just doesn’t work this way, especially given the fact that UPS and some other organizations got very rich contracts.”

A strike would hit 36 ports that handle about one-half of U.S. ocean imports. It could cost the economy $5 billion a day, per a JPMorgan analysis, as reported by Axios.  

As far as industries which will be impacted, according to S&P Global Market Intelligence as reported by Reuters, ports in the negotiating group handled $37.8 billion worth of vehicle imports during the 12 months ended June 30, 2024. The ports also lead the U.S. in shipments of machinery, fabricated steel and precision instruments, coming in at $97.4 billion, $16.2 billion and $15.7 billion, respectively.

Everstream Analytics points out that pharmaceutical and healthcare sector which relies on a time-sensitive supply chain may see the biggest impacts and potential material shortages that could disrupt production or patient safety. 

• The affected ports handle more than 91% of containerized imports and 69% of containerized exports of U.S. pharmaceutical products.
• Over 1 in 3 containers departing the U.S. with lifesaving medications leaves from the Port of Norfolk, VA.
• Nearly 30% of containerized pharmaceutical imports in the U.S. enter through the Port of Charleston, SC.
• If port strikes occur, this will lead to a spike in airfreight activity for time-sensitive supply chains such as pharmaceutical and could lead to capacity shortages for lower-value goods.

Mirko Woitzik, global director of Intelligence for Everstream Analytics said that his company’s analysis of historic congestion and strike data for U.S. ports concludes that every  24-hour shutdown of all East and Gulf Coast ports would result in operational backlogs that could take up to 7 days to clear. 

The compounding effects of displaced containers and equipment, disrupted schedules and vessel diversions would likely push the impacts well past the Thanksgiving holidays and potentially into December.

“Impacts would likely be less severe if the union decided to go on strike at one port at a time, a tactic the ILWU has used in a similar situation on the West Coast in 2022 and 2023," said Woitzik said. "The ILWU at the time reverted to ad-hoc 24-hour shutdowns of some terminals at the Port of Los Angeles, the Port of Oakland, and others to improve their bargaining position.”

Woitzik notes that retail goods may be the only category not as affected by a short or medium-term strike action, as many importers anticipated that the strike would move forward, and moved up the typical seasonal peak shipping season from September to August to stock inventories for holiday spending upticks. Most companies have about 3-4 weeks’ worth of inventory, risking a disruption to supply should the impacts of the strike continue beyond that time frame.

As far as West Coast ports being able to absorb the three-fifths of container shipments that come through the East and Gulf Coasts, the New York Times reports that logistic experts say that isn't possible. 

In terms of government involvement, the New York Times is reporting that the White House is not trying to broker a deal nor use federal power to block a strike. 

That is not good news to the National Retail Federation, who along with  177 US trade associations wrote a letter on Sept. 17 to President Biden saying that "it is imperative that the administration engage with the parties to quickly negotiate a new deal or agree to continue negotiations while keeping the ports open and cargo flowing. A strike at this point in time would have a devastating impact on the economy, especially as inflation is on the downward trend."

Dave Blanchard contributed to this article.