The International Longshoremen’s Association (ILA), the largest union of maritime workers in North America, is on the verge of a major strike as it negotiates a new Master Contract Agreement with the United States Maritime Alliance (USMX). The ILA is reported to be seeking a 77% pay raise to be phased over another six-year period. It also wants job protection by banning automation at the ports.
While some reports have cited different and varying figures about the ultimate cost to you, the end result is unanimous — product delays, product shortages and higher prices!
ILA President Harold Daggett has also brought up container royalty and top health care in an ILA video at a time when carriers and terminal operators have reached record profitability. The ILA has pledged to handle military cargo during the strike, and passenger cruise ships will not be affected in the strike at Atlantic ports and Gulf ports.
The timing of this strike is a September 30, 2024 contract expiration. It also happens to come when the U.S. economy is only starting to realize lower inflation rates on goods. This is also just 5 weeks ahead of the presidential election.
Major business groups are already warning of shortages and renewed inflation during the busy holiday shopping season. It also means holiday shipments may not arrive on time and assembly lines may run into slower output or shutdowns as parts and inputs would be stuck in port. Exports would also come to a halt.
As for why costs might rise, shipping container costs can see surcharges on each shipping container containing goods. And any backing up of containers would congest already-stretched supply chains. Shifting shipments ahead of time to West Coast ports or via other modes of transportation also result in higher transport costs.
These are just some of the ports (see map above) that will be affected if the strike occurs — Baltimore; Boston; Brunswick; Charleston; Houston; Mobile; New Orleans; New York/New Jersey; Norfolk; Philadelphia; Savannah; Tampa; and Wilmington.
BofA Securities maintains that over 80% of the volume of international trade in goods is carried by sea. And that is even higher for most of the world’s developing countries.
JPMorgan has estimated a daily economic cost of $3.8 billion to $4.5 billion per day. While some of the impact can be made up once operations return to normal, agriculture exports and other perishable goods could be facing a total loss.
UBS has spoken with global transportation contacts with a view that the strikes look very likely. It noted that some companies will be able to navigate port closures better than others.
The National Retail Federation warns of a significant impact on the economy just when inflation is on a downward trend. Referring back to the 2002 West Coast port lockout, the NRF noted that an 11-day closure of the Western ports likely cost the economy about $1 billion per day. It also warned that it took about six months for everything to recover.
The Association for Supply Chain Management polled its LinkedIn community and found that 73% of supply chain professionals believe the strike is “extremely or very likely to have a negative impact on their operations.” Only 8% of the professionals said the effects would not disrupt their networks.
As of this time, the White House has not given any indication that it will invoke the 1947 Taft-Hartley Act to prevent the strike and force both parties into a cooling-off period.
