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Impact of US port worker strike will mount over time

What’s happened?

On October 1st US port workers on the East and Gulf coasts walked off the job in a dispute with seaport operators over wages and the employment impacts of automation. The strike stopped activity at 14 harbours, including New York New Jersey; Savannah, Georgia; and Norfolk, Virginia, the country’s third, fourth and fifth respectively as measured by shipping containers handled. The walkout does not affect West Coast ports, include the US’s two most active in Los Angeles and Long Beach, California.

Why does it matter?

A brief closure of East and Gulf coast ports would have only a limited impact, primarily on perishable goods such as bananas, other fruit and vegetables. However, if the walkout by about 45,000 workers were to continue for an extended period, it would halt imports of intermediate inputs such as auto parts, soft commodities like wood and cotton, and non-perishable foodstuffs such as coffee and alcoholic drinks. Some retailers are also bracing for delayed shipments of finished goods that they ordered for sale during the year-end holidays. Exports from the ports will also be frozen.

The 14 ports involved in the labour dispute handle about 1m standard shipping containers a month, or about half of total US container volume. The strike also halted shipments of dry bulk materials, such as grains, coal and metallic ores. Goods currently in the ports will remain inaccessible, and ships newly arriving will have to drop anchor in harbours and wait for ports to reopen. Given the broad geographic reach of the work stoppage, shippers have few options to redirect deliveries. The strike does not affect the operations of passenger cruise ships or transport of US military supplies.

The near-term impact of the work stoppage will be attenuated by the heavy volumes of shipments made in advance of the walkout. For example, in August the Port of Long Beach reported its highest ever monthly volume of containers handled. In addition, many buyers of intermediate and finished goods now hold higher inventories than they carried in the recent past, as a result of more resilient supply-chain management in the wake of the covid pandemic and limited passages through the Panama Canal because of a local drought.

If the strikes continue for weeks or months, importers will begin to run down their inventories of intermediate or finished goods. Exporters will suffer from lost sales and mounting costs to store their output. As a result, firms may have to adjust or shutter their operations.

What next?

The two sides in the dispute appear far from an agreement, with the workers’ union, the International Longshoremen’s Association, demanding a wage increase of 77% over six years. The employers’ group, the United States Maritime Alliance, most recently offered a 50% boost over that period. The workers are also demanding that the port operators halt the pace of automation in order to maintain employment levels. Joe Biden, the US president, has refused to invoke a law, the Taft-Hartley Act, that would force striking workers to go back to work. Some shipment alternatives, albeit costly to use, include ports on the West Coast or in Canada, as well as use of air freight for perishable or high-value products.

The analysis featured in this article can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, enabling organisations to identify prospective opportunities and potential risks.