Shipping Companies Brace for a Potential US Strike Impacting Supply Chains

21 Jun Shipping Companies Brace for a Potential US Strike Impacting Supply Chains

A brewing conflict between dockworkers and their employers on the US East Coast threatens to be the next significant blow to already strained supply chains. Several major shipping companies are preparing for the worst-case scenario of a strike if dockworkers and major terminal companies fail to agree on a new collective bargaining agreement by September.

“A shutdown of East Coast ports would pose a significant risk, not only to shippers, but to the US economy in general,” stated Nathan Strang, Director of US Ocean Freight at Flexport.

Hapag-Lloyd, in a statement to ShippingWatch, assured customers that it is monitoring the situation closely and will take measures to mitigate the impact. However, the company acknowledges the uncertainty surrounding if and when a strike might occur.

If the worst happens, the challenges would be enormous. “This is not the kind of event that can be easily planned for or mitigated,” Strang noted.

Systemic Pressure

On the US East Coast, dockworkers have expressed significant dissatisfaction with Maersk and other shipping companies operating container terminals in ongoing labor negotiations. Recently, the International Longshoremen’s Association (ILA) canceled a meeting with the United States Maritime Alliance (USMX), citing issues with Maersk’s APM Terminals using a non-union IT system at the Port of Mobile, Alabama.

This dispute raises the risk of a port strike amidst existing supply chain problems. Globally, the industry is grappling with overcrowded ports in Asia and ongoing disruptions in the Red Sea. Companies are also advancing their purchases for the holiday season, creating a capacity crunch on the world’s oceans.

“The extremely high demand means there is no extra capacity to pull cargo forward,” Strang explained. In the event of a strike, diverting cargo away from the East Coast would be almost impossible due to capacity limitations at other ports.

A Drewry report indicated that the time ships spend waiting to dock at major ports increased by 43% between the third quarter of 2023 and the second quarter of 2024. Moreover, another port in Asia is currently facing challenges comparable to those experienced during the pandemic.

“Port strikes on the US East and Gulf coasts could extend disruptions,” a new Drewry analysis states.

A potential strike would exacerbate the already busy US ports, with the National Retail Federation predicting US container imports to reach 2.1 million tons in May, an 8% increase from May 2023.

Hope Ahead

Despite the concerns, history shows that port strikes are rare in the US. However, the ongoing collective bargaining creates significant noise and concern. Port of Los Angeles CEO Gene Seroka highlighted that any slowdown or work stoppage could affect billions of dollars worth of imports.

Nathan Strang pointed out that risk is not binary. “There are many options between keeping ports fully open and shutting them down completely.” He referred to the West Coast strike in 2023, which was resolved without widespread disruptions despite prolonged negotiations.

Currently, the ILA is dissatisfied with Maersk’s move towards automation, which threatens jobs at US container ports. The union has urged President Joe Biden to support the dockworkers.

As of now, there is no information on when or where new negotiations between dockworkers and employers will resume.