Supply Chain Scanner - Week of September 16, 2024

Weekly blog by Emily Atkins

Controlled chaos: Long-anticipated U.S. East Coast ports strike has given shippers time to prepare

It’s no surprise that as of September 30, 45,000 U.S. East and Gulf Coast dockworkers are likely to walk off the job.

Talks between the International Longshoremen’s Association (ILA), representing the workers and the United States Maritime Alliance Ltd. (USMX), representing ports employers, are moribund.

The union is looking for salary hikes and commitments from the terminal operators that automation won’t eliminate jobs. “In regards to automation or semi-automation, we’re completely against any type of robotic taking over an actual human being’s job,” Dennis Daggett, the union’s vice president, asserted in a podcast this week.

The union’s adamant stance has analysts at Linerlytica saying the strike looks certain. “The 14 ports controlled by the ILA handled 28.4m TEU of containerized cargo in 2023, almost 550,000 TEU each week. That added up to 55% of total U.S. container imports. For each week the strike continues, it would hold up 1.7% of the global containership fleet,” the analysis said.

Danish container analysts Sea-Intelligence said that every day of a strike would require four or five days to return to normal. A two-week strike would thus not see normal operations return until early 2025. Shippers have already been taking measures to prepare for the shutdown. Container volumes across the U.S. were elevated in August, with a U.S.-wide bump of 12.9% across the board, according to analysis by Container xChange. And at the Port of Long Beach in California, shipments were up 34%.

The good news is that U.S. importers are largely in fine shape, with inventories having been restocked earlier than the traditional September rush, thanks to concerns about potential disruptions. "While the threat of strikes looms large, it’s important to note that U.S. inventories are currently strong due to the pulling forward of orders earlier this year to avoid existing disruptions. This stockpile will act as an essential buffer, mitigating the risk of container rates spiking dramatically due to the strikes,” said Christian Roeloffs, CEO of Container xChange.

In fact, inbound container rates to the U.S. East Coast have seen a dramatic decline recently as demand sinks. The Drewry World Container Index (WCI) saw a 21% decrease in rates to the East Coast, coupled with a 13% drop overall for inbound cargo.

But with the strike a near certainty, Port of Long Beach CEO Mario Cordero said last week that his operation is ready to manage an increase in throughput. Terminal operators are ready to “flex their gate hours as necessary and our overflow site — our Short Term Overflow Resource yard facility at Pier S — is open and has available capacity,” Long Beach COO Noel Hacegaba said at a press conference.

However, a surge in containers bound for the west could mean increased delays and dwell times, along with equipment shortages. HSBC Global Research suggested in its latest Global Freight Monitor report that “any go-slow actions by port workers at WC ports in solidarity with the ILA could worsen the situation.”

To date, C.H. Robinson has seen around five percent of historic East Coast volumes diverted to the West Coast, meaning that some shippers have re-routed freight potentially as risk mitigation against a potential strike. Forward-looking data into Los Angeles/Long Beach shows an expected 10 to 15% increase in volumes during the second half of September.

For Canadian ports, Montreal and Halifax will likely see an uptick in traffic as vessels blank sailings to the U.S. or re-route to the north. If this occurs there will likely be downstream congestion as the railways try to pick up the extra containers and ship them to the mid-west. Frank Kenney, director of industry solutions at systems integrator Cleo, told The Loadstar expected increased traffic through both Halifax and Montreal, “primarily due to their proximity to rail carriers, making them ideal for inbound and outbound freight”.

However, Halifax, in particular, is much further from Chicago than New York, adding a day to the rail transfer and increasing costs for shippers. Kenney also warned of bottlenecks and delays due to multiple border crossings and the rail chokepoint at Port Huron, Michigan.

As this strike has been on the cards for some time, it has given prudent shippers plenty of opportunity to prepare. What has your strategy been for imports or exports through the U.S. East Coast in recent weeks? Are you shifting west? Stockpiling inventory? Get involved in the conversation on LinkedIn and share your tactics!

Join the conversation on Canada’s Logistics Community forum!

Emily Atkins
President
Emily Atkins Group

 

Emily Atkins is president of Emily Atkins Group and was editor of Inside Logistics from 2002 to 2024. She has lived and worked around the world as a journalist and writer for hire, with experience in several sectors besides supply chain, including automotive, insurance and waste management. Based in Southern Ontario, when she’s not researching or writing a story she can be found on her bike, in a kayak, singing in the band or at the wheel of her race car. LinkedIn: https://www.linkedin.com/in/emilyatkinsgroup/