US: How will ILA maritime workers' strike affect East Coast and Gulf Coast port operations?
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- Containerised scrap export disruptions likely at key ports
- Shipping costs may rise, experts suggest rerouting
The International Longshoremen's Association (ILA), North America's largest maritime workers' union, plans to strike at all Atlantic and Gulf Coast ports on 1 October 2024 if a contract agreement with the United States Maritime Alliance (USMX) is not reached.
The union demands better wages and protections against automation. As the deadline looms, industries are preparing for significant disruptions.
Around 45,000 dockworkers at 36 ports across the East Coast could be affected by the strike, according to reports.
Baltimore, Boston, Charleston, South Carolina Jacksonville, Florida, Miami, Houston, Mobile, Alabama, New Orleans, New York/New Jersey, Norfolk, Virginia, Philadelphia, Savannah, Georgia, Tampa, Wilmington, Delaware.
Why is the Longshoremen important?
Longshoremen primarily operate across major U.S. port states like California (Los Angeles/Long Beach), New York/New Jersey, and Washington (Seattle/Tacoma). Potential strikes in key East Coast hubs, including New York, New Jersey, and Baltimore, could severely disrupt container trade, impacting supply chains, consumer markets, and the broader economy.
Commodities slated to hit due to potential supply chain disruptions
- Ferrous scrap, SS scrap, and non-ferrous scrap: While this may involve additional transit time through the Panama Canal or using air freight, exploring all alternatives is crucial to prevent delays at East Coast ports, whereas ferrous scrap, Stainless steel scrap, and other base metal exports might be facing the heat of this strike.
- Market feedback indicates that bulk ferrous scrap trades are expected to remain unaffected by the U.S. workers' strike.
- Cars, auto parts: The Port of Baltimore is a leading hub for car shipments in the U.S., particularly for European vehicles. Disruptions could lead to shortages of these cars. Additionally, auto parts sourced from Europe that transit through East Coast and Gulf Coast ports may also face delays.
- Machinery parts: East Coast ports dominate the shipment of machinery, fabricated steel, and precision instruments. Any interruptions in these ports could hinder the supply of critical machinery components, impacting various industries' reliant on timely deliveries.
Major ports operated by Longshoremen for scrap exports from EC and GC:
- Exported 2.81 million tonnes (mnt) of ferrous scrap in the first seven months of Calendar Year 2024 (7M'CY24).
- Exported 0.788 mnt of non-ferrous scrap in the same period.
- Exported 0.12 mnt of stainless steel scrap.
Key implications of a potential port strike
- The strike could disrupt the container market, leading to congestion, increased costs, and reduced container availability.
- Major supplies such as ferrous scrap, automotive parts, and perishables could face delays and increased costs.
- A strike could cost the U.S. economy over $1 billion/day due to supply chain disruptions.
- A prolonged strike could lead to exacerbating economic pressures.
Challenges to immediate supply chain
Stranded cargo: The Port of New York and New Jersey is set to receive 42 container ships in the coming days, raising concerns that any work stoppage could leave cargo stranded. Shipping lines like Ocean Network Express (ONE) advised customers to pick up their containers by 30 September, especially perishable or hazardous materials.
Rerouting challenges: Redirecting shipments to the West Coast or alternate East Coast ports could create logistical bottlenecks, particularly for goods needing passage through the Panama Canal.
Cost Escalations: Maersk has announced a disruption surcharge starting 21 October, amounting to $1,500/20ft equivalent unit (TEU) and $3,000/40ft equivalent unit (FEU).
Hapag-Lloyd will implement a $1,000 "Work Disruption Surcharge" for imports from East Asia on 19 October and for global cargo on 18 October.
CMA CGM plans to introduce various surcharges, including $800/TEU for exports starting 11 October and a $1,000 peak season surcharge for imports from the Indian Subcontinent and the Middle East beginning 1 November.
Even a short strike could lead to significant backlogs and delays as ports manage stranded containers.
Analysis of strike duration, backlog clearance
- 1-Day strike: If the strike lasts for just one day, the estimated timeline to clear the backlog is 7 days. This suggests that operations may resume relatively quickly, but a week will still be needed to address any delays caused.
- 3-day strike: A three-day strike is expected to result in a much longer backlog clearance period of 21-25 days. This indicates that the impact of the disruption is significant, leading to a cumulative effect on operations and logistics.
- 7-Day strike: In the event of a seven-day strike, the backlog may not be cleared until mid-November. This extended timeline suggests severe operational disruptions, indicating that a longer strike could significantly affect the supply chain, causing prolonged delays in cargo movement.
