by Manal Barakat, SeaNewsEditor
If contract negotiations of port workers in the US East and Gulf Coasts fail, ports could face a coast-wide strike as early as 1 October 2024. With this report, Kuehne+Nagel provides you with market insight and knowledge to prepare you for the potential scenario.
Latest bargaining developments
The ILA’s current labour contract, covering 45,000 union members across the US East and Gulf Coasts, expires on 30 September 2024.
Earlier in August, the International Longshoremen’s Association (ILA) announced preparations for a potential coast-wide strike on 1 October 2024 if a new agreement with the United States Maritime Alliance (USMX) is not reached.
The latest updates reveal that the ILA filed a Notice to Mediation Agencies with the Federal Mediation & Conciliation Service (FMCS), indicating that talks could be delayed longer than expected.
Possible operational impact and carriers' reaction
Operational impact
If the ILA members go ahead with strikes, the operational impact will depend on the scope of the strike.
It is still unclear whether workers of all East and Gulf ports will join or whether the labour action will be limited to some ports.
Nevertheless, Global Sea Logistics Trade Manager, Europe/Mediterranean/ North America Oliver Roskothen expects the immediate stoppage of all loading activities of services from Europe to the East Coast. He further expects vessels en route to the region to anchor outside US ports.
To estimate the potential impact on inbound and outbound TEUs, we looked at the average laden volumes of three key East Coast ports over the past five years (2019-2023): New York, Savannah and Charleston.
The data shows that October volumes, both imports and exports during the 5-year period, averaged approximately 498,000 TEU for New York, 347,000 TEU for Savannah, and 226,000 TEU for Charleston (the total average exceeded 1 million TEU).
This could illustrate the volume that could be blocked in each of the mentioned ports if a strike remains throughout the month of October.
Looking at the potential impact on a week-by-week basis, the total average per week for the three ports combined neared 270,000 TEU in October.
Carriers reaction
While carriers are likely to maintain services, we might see more blanked sailings on the Transpacific and the Transatlantic trades. In addition, carriers might restrict shipper allocations and raise rates.
Kuehne+Nagel Global Sea Logistics Trade Manager Transpacific Eastbound Will Hazlegrove says some carriers might increase West Coast services, although the fixed capacity of rail and port infrastructure poses a limitation.
Furthermore, carriers may reduce free time for containers and prioritise certain imports. Eventually, congestion could lead to equipment scarcity.
What commodities are impacted the most?
Cheaper commodities will likely be priced out of the market during a strike.
Beneficial Cargo Owners (BCOs) and global Non-Vessel Operating Common Carriers (NVOs) may receive some extra capacity. However, cargo related to the traditional retail peak season in the US has mostly already moved.
Meanwhile, non-seasonal cargo, such as industrial, automotive, and healthcare goods, will face challenges.
What alternatives do shippers have?
As alternatives, shippers can rely on US Pacific Southwest (PSW) ports, such as Los Angeles and Long Beach ports, which are likely to handle the majority of increased volume. However, this could lead to congestion due to heightened transload and rail activity.
For some inland point intermodal (IPI) moves, Mexico is an option, says Hazlegrove. However, limited infrastructure and expensive insurance make it less favourable.
On the Canadian side, ports can also be an alternative during a potential strike. However, congestion at Canadian ports could build up quickly.
What could shippers do to prepare?
- Route priority cargo via West Coast to East Coast points: Shippers can strategically route cargo to East Coast destinations by rail or transload programs from West Coast ports, especially since some carriers currently offer extra capacity on the West Coast route.
- Adjust the existing supply chain: While major supply chain rearrangements are mostly too late, some adjustments are still possible. Shippers can assess their cargo and explore options to mitigate the strike's impact.
- Airfreight as an alternative: some shippers could choose to ship their goods by air if the labour action remains for an extended period.
- Inventory restocking: According to the Journal of Commerce, many importers are restocking inventories and frontloading orders to mitigate the impact of these potential disruptions.
Importers and exporters who have proactively established contingency plans are well-positioned to navigate potential disruptions caused by a strike. However, initiating such plans at this stage may prove challenging, given the limited alternatives available.
For the latest port statuses and news updates, please refer to Kuehne+Nagel’s seaexplorer and Sea News.
