The looming strike at US East Coast and Gulf Coast ports is set to cause significant disruptions to global supply chains, affecting a wide range of industries and commodities.
This blog explores the potential impacts of the strike, the preparations being made, and the broader implications for the economy and consumers.
Major Supply Chain Disruptions
The ripple effects of the strike action at ports on the US East and Gulf coasts are expected to cause severe supply chain disruptions well into 2025.
This is due to the significant volume of goods that pass through these ports, which account for over 40% of total containerized goods entering the US.
The strike would shut down 36 ports, including some of the busiest in North America, such as New York/New Jersey, Savannah, and Houston.
Economic Impact
The economic consequences of the strike are profound. An estimated $34 billion in freight is currently en route to these ports on 147 ocean vessels.
The potential economic impact of a 30-day strike at the ports of New York and New Jersey alone could be as high as $641 million per day.
The strike would also affect agricultural exports, which are a significant part of the US economy.
In 2023, over 143 million metric tons of agricultural products, worth over $122 billion, were transported through ocean ports.
A strike would create backlogs of exports, denying farmers access to higher prices in the world market and leading to a domestic oversupply, driving down prices for key commodities.
Impact on Global Shipping
A prolonged strike could prove toxic to global container supply chains, with ships being stuck at US East and Gulf coast anchorages waiting for a berth, affecting the ability of carriers to maintain schedules across other trades.
Around 16% of the global container shipping fleet is deployed on services to the US East and Gulf coasts.
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.
Preparations and Contingency Plans
Shippers have less than two weeks to prepare contingency plans for the potential strike.
Importers and exporters can establish a multi-coastal transportation network in advance of the labor disruption, shifting cargo to ports along the US West Coast, Canada, or Mexico.
Airfreight is also an option for time-sensitive shipments, though it comes at a higher cost and with capacity concerns.
However, experts are mixed about whether it’s too late to enact effective contingency plans, with most agreeing that the longer companies wait, the more expensive adjustments can become.
Government and Industry Response
The Biden administration has stated it will not invoke powers under the Taft-Hartley Act to force union members to go back to work.
Meanwhile, 177 trade associations have called for an immediate resumption of negotiations, recognizing the extremely serious consequences of strike action on the US economy.
The International Longshoremen’s Association (ILA) has rejected the latest wage offer from the United States Maritime Alliance (USMX), and the chances of averting an October 1 strike are dwindling.
In Summary,
The impending strike at US East Coast and Gulf Coast ports is set to cause significant disruptions to global supply chains, with far-reaching economic impacts.
Businesses and shippers are bracing for a challenging period ahead, with contingency plans being put in place to mitigate the effects.
However, the full extent of the disruption will depend on the duration of the strike and the effectiveness of the measures taken to address it.
As the situation unfolds, it will be crucial for all stakeholders to stay informed and prepared for the potential challenges ahead.
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