A strike at the US East terminal is imminent and will affect more than half of US imports
ILA and USMX are at an impasse in negotiations over wages and port automation, and a strike is almost certain, with the threat of a strike at ports in the eastern United States and the Gulf of Mexico that would affect more than half of U.S. imports, resulting in a loss of global container capacity. The ILA opposes automation, a stance that Vespucci Maritime warns will drive up import costs and weaken export competitiveness. In the event of a strike, the ports of Halifax and Montreal in Canada could be alternative options, but face transportation challenges. Gridlock poses a threat to global supply chains.
As negotiations between the International Longshoremen's Association (ILA) and the United States Maritime Union (USMX) continue to deadlock over wage increases and port automation, the grim prospect of a strike at U.S. Eastern and Gulf Coast ports seems inevitable.
USMX recently said that although the current agreement is set to expire in three weeks, if the ILA can meet its demands, the two sides are still hopeful of reaching agreement on new contract terms to avoid unnecessary and damaging strikes on both sides. However, the ILA has insisted on completing negotiations at the local level before signing a national contract, and several regional longshoremen and employers, such as Jacksonville, Tampa and Philadelphia, remain at an impasse, dimmer prospects for a New Deal by Oct. 1.
Linerlytica, a shipping analyst, pointed out that given the current situation, a strike is almost certain, highlighting that the 14 ports controlled by the ILA handled 28.4 million TEUs of containerized cargo in 2023, with a weekly throughput of nearly 550,000 TEUs. Each extended week of the strike will halt about 1.7 per cent of the global container fleet.
In addition to the wage issue, port automation has become another core dispute between the two sides. Dennis Daggett, ILA's executive vice president, has made it clear that he opposes automation, arguing in favor of technologies that improve human productivity, but firmly resisting robots replacing human labor. He vowed to fight the automation trend to the end and is confident that ILA will prevail on a global scale.
Vespucci, however, the chief executive of Maritime Lars Jensen warns that ILA resolutely resist for automation will lead to the rising cost of imported goods, weaken the international competitiveness of U.S. exporters and hinder the overall efficiency of ascension. He stressed that efficient ports are more attractive to shipping companies because they mean shorter stay times and greater operational efficiency.
Lars Jensen said: "If you are a decision maker for a shipping company, where do you prefer to deploy the best quality and most cost-effective vessels? It is to choose those ports that provide efficient services and can significantly reduce the length of residence of ships, thereby increasing the transport time of goods; Or do you choose a less efficient port that could cause your valuable vessels to stay longer than necessary?"
Meanwhile, Frank Kenney, director of industry solutions at systems integrator Cleo, predicts a significant increase in traffic at the ports of Halifax and Montreal in Canada, which are alternatives due to their proximity to the rail network, once the strike occurs. But he also pointed to the challenges of moving goods, especially through the Midwest rail system, especially the bottleneck of Chicago as a hub, which can increase transit time and costs.
The impasse in negotiations between the ILA and USMX not only threatens the normal operation of U.S. ports, but also could have ripple effects on global supply chains, a crisis compounded by the two sides' differing positions on automation.
In addition, if the United States east coast dock workers launched a strike on October 1, according to the forecast, it will spread to the United States more than 50% of the container cargo import, for a major impact on global supply chains. HSBC analysis points out that globally, about 15% of the container fleet will also be affected.
In the face of this possibility, the National Retail Federation (NRF) has adjusted its strategy ahead of schedule, raising its September container import forecast, aiming to mitigate the disruption caused by the strike by bringing forward loads. However, the move also means that shipments from Asia have peaked and could see a significant correction in the coming months, with spot prices likely to come under further pressure unless the strike brings an unexpected turnaround.
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The strike was triggered by a long-running deadlock in negotiations between the International Longshoremen's Association (ILA) and the United States Longshoremen's Association (USMX). The ILA has made it clear that if the two sides cannot reach an agreement by October 1, it will take strike action. Although USMX has expressed a willingness to resume negotiations, the firm stance of the ILA wage Committee and the tough stance of the ILA have made the prospects for a settlement uncertain.
HSBC warned that the strike would not only cause container rates to rise in the fourth quarter, but could extend into the Chinese New Year at the end of January, adding to market volatility. In addition, the shipping company has begun to take measures, such as maersk line group is warning the potential shipping bottlenecks and four to six weeks of delay, some companies even have transport the goods to the west coast to avoid risk.
However, turning to the West coast is not a foolproof solution. HSBC analysis pointed out that while the move could ease import pressure from Asia, it could put an additional burden on West Coast ports and land cargo evacuation systems. Import goods from Europe and Latin America, meanwhile, probably because of Canada's Atlantic coast ports and Mexican port handling capacity is limited and retention and further aggravates the strain of the supply chain.
More worryingly, the strike at East Coast ports could become a new capacity challenge for the global container fleet. In the context of the global fleet is already under pressure due to the situation in the Red Sea and other factors, the strike may re-affect the capacity of container ships and container shortages, causing freight rates to soar. Alphaliner data shows 4.6 million TEUs, or 15 percent of the world's total fleet capacity, serving East Coast and Gulf Coast port routes could be suspended during the strike, with far-reaching implications for global trade.
Taken together, a potential strike at US East Coast ports not only threatens more than half of US container imports, it could also have a ripple effect on the global shipping market, increasing freight rate volatility and supply chain uncertainty.
