Ripple effects of strike action at ports on the US East and Gulf coasts will cause severe supply chain disruption into 2025, with analysts warning government intervention may be required to avoid major economic fallout, Xeneta highlights.
A total of 36 ports are preparing for a complete stoppage if a new deal cannot be agreed with the International Longshoreman’s Association (ILA), which represents 85,000 port workers, before the 30 September deadline.
There are ships on the ocean right now carrying billions of dollars of cargo heading to ports on the US East and Gulf Coast. These ships cannot turn back and they cannot realistically re-route to the US West Coast. Some may divert to ports in Canada or even Mexico East Coast, but the vast majority will simply wait outside affected ports until the workers return.
…Peter Sand, Chief Analyst at Xeneta, said. “The consequences will be severe, not only through congestion at US ports, but importantly these ships will be delayed returning to the Far East for the next voyage. A strike lasting just one week will impact schedules for ships leaving the Far East on voyages to the US in late December and throughout January.”
Ocean supply chains have already been badly disrupted during 2024 due to conflict in the Red Sea, drought in the Panama Canal and Baltimore bridge collapse.
Data from Xeneta – the ocean and air freight intelligence platform – shows average spot freight rates on the trade from the Far East to US East Coast spiked more than 300% between 1 December 2023 and early July this year.
More than 40% of total containerized goods enter the US through ports on the East Coast and Gulf Coast, so the stakes could not be higher.
…Sand said.
He added that, to stop trade entering the US on such a large-scale, even for short period of time, is highly-damaging to the economy so government intervention will be needed to bring the matter to a resolution for the good of the nation. Last week, 177 trade associations called for an immediate resumption of negotiations because they recognize the extremely serious consequences of strike action on the US economy.
Government intervention should be seen as a strength in the system, because it will prevent a dispute between a smaller group of interests – whether that is dockworkers or port terminal owners – from significantly impacting the wealth of the entire nation.
…Sand stated.
Han Deng, transportation partner at law firm Reed Smith, explained that the potential strike would also have significant global shipping and economic consequences, disrupting supply chains and trade flows between the U.S. and its key trading partners in the rest of the world as a ripple effect.
As we have witnessed massive backlogs at ports, supply chain disruptions, delayed shipping schedules and altered shipping routes through recent history, such as the COVID-19 global pandemic and the March 2024 Baltimore Bridge collapse, similar things would happen again.
… said Han Deng, adding that the port of New York and New Jersey is one of the busiest ports in the United States. It is no surprise, then, that the Port Authority of New York and New Jersey (PANYNJ) is trying to increase operations as much as possible ahead of the looming deadline. This includes encouraging shippers to delivery as much cargo as possible and coordinating with partners across the supply chain. According to the PANYNJ, approximately $240 billion in goods is moved through the port each year.
Sea Intelligence has estimated a one-day strike by the ILA would take five days to clear. The effect of such a strike could last long even after it is resolved, with the disruptions mentioned above taking weeks or months to recover, in a high inflation economy with regional conflicts and geopolitical uncertainty.
… Deng concluded
