Just six months after the partial collapse of the Francis Scott Key Bridge in Baltimore, Maryland, threw the US’ supply chain into disarray, the country’s logistics operators are staring down the barrel of another major disruption.
“Things were just starting to get back to normal,” Kenneth Sanchez, CEO of Chesapeake Specialty Products, told Reuters on Wednesday.
However, unlike the unexpected, accidental closure of Baltimore’s port, the looming crisis is both predictable and entirely avoidable. The 85,000-strong International Longshoremen’s Association (ILA) is preparing to begin industrial action that will halt operations at every major port on the US’ East and Gulf coasts.
The strike is taking place in response to attempts by the United States Maritime Alliance (USMX) to get the union to accept what ILA President and chief negotiator, Harold J. Daggett, calls “a low-ball wage package.”
A low-ball offer
Refuting repeated claims by the USMX that negotiations over an upcoming contract had broken down, the ILA claimed in a statement that the two sides have communicated multiple times in recent weeks. The stalemate remains in Master Contract negotiations because USMX continues to offer ILA longshore workers an unacceptable wage increase package, according to an ILA statement.
“They call me several times each week trying to get the ILA to accept a low-ball wage package,” Daggett said. “My ILA members are not going to accept these insulting offers that are a joke considering the work my ILA longshore workers perform, and the billion dollar profits the companies make off the backs of their labour.”
The East Coast ports handle approximately 35-40% of US imports and exports, while the Gulf Coast ports account for 10-15% of imports and 20-25% of exports.
A full scale shut down of 36 ports in the Eastern United States could have major consequences for the country’s supply chain. Last month, the five biggest ports on the East and Gulf Coasts processed about 24,766 40-foot containers of imports and exports, with a total value of around $2.7 billion per day.
2024’s biggest supply chain disruption?
If the ILA goes on strike, it could represent a disruption of similar magnitude to the drought in the Panama Canal earlier this year. A report by industry intelligence firm project44 highlights a previous example of the impact that a stevedore strike can have on US supply chain. Their report notes that the US West Coast experienced similar disruptions in June of 2023 due to delays in reaching a new contract.
On June 3, 2023, after working without a contract since July 2022, union workers staged a “no-show,” where none reported to work for the day. After just one day of closures, it took three weeks for ports to return to normal dwell times, with delays increasing by as much as 148%. If a full-scale strike occurs on the East Coast, it would likely last longer than one day, and the disruptions would be even more severe. For every one week of an ILA strike in 2024, project44 estimates it would take 4-6 weeks to fully recover.
“Ahead of the peak holiday retail season, extreme weather and industrial strikes are heightening pressures for supply chains. With supply chain disruption becoming the norm, organisations must become more agile to avoid lasting impacts; data insights are key to this,” said Renaud Houri, EVP of International Markets at project44. “In layman’s terms, this means businesses have a holistic view of their operations to make better, faster decisions in the face of disruption, therefore resulting in superior on-time deliveries and happy customers.”
Rail, air, and the West Coast
A strike or work stoppage would severely limit the amount of cargo that can be processed at US ports, and organisations are already scrambling to find workarounds.
These have included retailers, manufacturers and other importers rushing to import goods ahead of the strike deadline to avoid having their cargo stuck. Other organisations have turned to costly air freight alternatives, or rerouted shipments to West Coast ports, completing their journeys via rail.
A prolonged strike by the ILA, alongside an ongoing strike by 30,000 machinists at Boeing that Reuters reports has already started affecting the embattled aircraft maker’s supplier network, could allegedly harm growth in the US job market next month ahead of the November presidential election.
- Risk & Resilience
