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The wild seas of the maritime trade industry never rest. In the previous years alone the industry has dealt or is dealing with a global pandemic, doubt to major canals, war and attacks on vessels. Now the industry is set for further upheaval as labor unions representing all East and Gulf coast ports are threatening strike action, creating a major disruption to global supply chains. ABSI this week covers the looming industrial action. 

The International Longshoremen’s Association (ILA), the largest union representing dock workers on the East Coast of the US, representing ~25,000 port workers. These workers handle cargo at major ports stretching from Maine down to Texas, including critical hubs such as the Port of New York and New Jersey, the Port of Savannah, and the Port of Virginia.

On the other side of the table is the United States Maritime Alliance (USMX), which represents the employers, including shipping companies and terminal operators, who manage port facilities and the movement of goods. The current labor contract is nearing expiration, and with key issues unresolved, the possibility of a strike is becoming more real as the October 1st deadline approaches.

Source: Wikipedia

Unsurprisingly, the primary issues for workers are: wages, automation, and working conditions. Dockworkers are pushing for significant wage increases that reflect the rising cost of living, especially in major port cities where the cost of housing has skyrocketed. Additionally, dockworkers are requesting better working conditions, particularly around safety protocols and schedules. With the intense physical demands of the job and the risks associated with operating heavy machinery, workers want improved safety measures, more predictable schedules, and better access to healthcare benefits. 

Finally, a critical sticking point in the negotiations is the increasing use of automation at ports, which unions see as a direct threat to jobs. Automation technology is being introduced to streamline operations and reduce labor costs, but it also threatens to eliminate jobs traditionally handled by dockworkers. The unions are demanding limits on automation or at least guarantees that displaced workers will be retrained and reassigned rather than laid off.

It is important to appreciate how devastating a strike will be to the global economy. The ports in question receive 41% of port volume and the strike would come at a critical time of the year as markets approach Black Friday, Cyber Monday, and Christmas shopping periods. This will result in supply shortages and higher prices for consumers at a time when the US Fed is intent on cutting interest rates. Additionally the strikes have the potential to influence the US Presidential election as noted by the CEO of Flexport, Ryan Petersen.

Source: X

The US President has the power to delay the strike by imposing an 80-day cooling-off period but it is widely expected that these powers won’t be used as it is likely to negatively impact the election hopes of his Veep Kamala Harris. However, the economic impact from a strike might do more reputation damage to the Biden/Harris administration instead. They’re caught between a rock and a hard place. 

The US port strike looms as a critical inflection point for supply chains, businesses, consumers, and financial markets. While there is hope that negotiations will lead to a resolution and a strike avoided, it doesn’t look likely at this stage. Should these negotiations fail, the consequences will be felt not just in the US but globally with shipping price increases and a downturn in consumer demand as a point in time when the global is on a precarious recovery path. 

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