Supply Chain Turmoil Ahead: East and Gulf Coast Ports?Set for Strike Action

The U.S. East Coast and Gulf Coast ports are bracing for a possible major strike due to a breakdown in negotiations between the International Longshoremen's Association (ILA) and the U.S. Maritime Alliance (USMX). The dispute revolves around the salaries and benefits of approximately 45,000 dockworkers. The issue might disrupt the supply chain and impact global logistics and economic stability if not addressed.

Background of the Strike

The potential strike is attributed to a deadlock in labor negotiations between the International Longshoremen's Association (ILA) and the U.S. Maritime Alliance (USMX). The ILA, representing approximately 45,000 dockworkers at over thirty ports on the East Coast and Gulf Coast, is facing a contract expiration with USMX on September 30, 2024. Despite several rounds of negotiations, key issues concerning wages, benefits, and working conditions remain unresolved.

Harold Daggett, the ILA President, has stated that the union members' contributions have not been adequately recognized or rewarded. Should a new agreement not be reached before the contract expires, a full strike will commence on October 1, 2024. Such a statement reflects the union's strong demand for improved working conditions. USMX, in response, has proposed various improvements to compensation and benefits, but the ILA remains dissatisfied with these offers, leading to slow progress in the talks.

The Aftermath of Prospective Walkout

Should the strike occur, operations at East Coast and Gulf Coast ports will be suspended, impacting the movement of goods between the United States and the global market. Sea Intelligence projects that a one-day strike could lead to a backlog of 74,000 TEUs, with the backlog requiring four to six days to resolve. Consequently, if the strike endures for a week, ports may not resume normal operations until mid-November; a two-week strike could result in a full recovery only by 2025.

Retailers, notably import-dependent companies such as Walmart, have begun advancing shipments to prepare for the potential strike. However, not all businesses can easily adopt this strategy. As the strike date approaches, many businesses have already lost their opportunity to act. The situation is further complicated by extended transit times from Asia due to rerouted shipping caused by Houthi attacks in the Red Sea. Such potential strikes would exacerbate these delays, even triggering equipment shortages, increased freight costs, and congestion at Asian ports.

The Hustle Atmosphere of Port of LA and Port of LB

Amid the potential strike threat, the Port of Los Angeles (LA) and the Port of Long Beach (LB), the two major ports on the U.S. West Coast, stand out. Both ports recorded their highest-ever July figures marked by a continuing rise in cargo demand. The Port of Los Angeles achieved a container throughput of 940,000 TEUs in July, a 37.3% increase compared to the previous year. Imports totaled 501,000 TEUs, up by 37.6%, while exports rose to 115,000 TEUs, a 4.1% increase. Empty containers also saw a 54.2% increase to 323,000 TEUs. The Port of Los Angeles reported a total throughput of 5.671 million TEUs, representing a 17.6% year-over-year increase for the first seven months of this year.

Similarly, the Port of Long Beach saw a container throughput of 882,000 TEUs in July 2024, marking a 52.6% increase year-over-year. Imports surged by 60.5% to 435,000 TEUs, while exports grew by 16.3% to 105,000 TEUs. Empty containers also increased to 342,000 TEUs, a 57.8% rise. Mario Cordero, the CEO of Long Beach, attributed the strong performance to the high demand for back-to-school products.

The potential strike on the East Coast, coupled with the busy conditions at the Ports of Los Angeles and Long Beach, creates a complex scenario for global port logistics. The potential strike could lead to significant disruptions in the global supply chain while the high throughput at West Coast ports indicates ongoing growth in cargo demand. Companies and supply chain stakeholders need to stay alert to these updates and get prepared to handle potential logistical challenges. In the face of both labor disputes and port congestion, enhanced coordination and preparedness are essential to maintain global logistics network stability and efficiency.