The strike at the East Coast Terminal of the United States is inevitable and will affect more than half of the U.S. imports

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Negotiations between ILA and USMX on wages and port automation have reached a deadlock. A strike is almost certain. Ports in the eastern United States and the Gulf of Mexico are facing the threat of strikes. The strike will affect more than half of the United States' imports, causing damage to global container shipping capacity. ILA opposes automation, while Vespucci Maritime warns that this stance will drive up import costs and weaken export competitiveness. If a strike occurs, the Canadian ports of Halifax and Montreal may be alternatives, but they will face transportation challenges. The standoff poses a threat to global supply chains.

As negotiations between the International Longshoremen's Association (ILA) and the United States Maritime Union (USMX) continue to be deadlocked on wage increases and port automation, ports on the eastern United States and the Gulf Coast are facing a severe situation of strikes, which seems to be inevitable.

USMX recently stated that although the current agreement is about to expire in three weeks, if the ILA can meet its demands, the two parties are still expected to reach a consensus on the terms of a new contract to avoid unnecessary strikes that are damaging to both parties. However, the ILA insists on completing local-level negotiations before signing a national contract, while dockworkers and employers in several areas, such as Jacksonville, Tampa and Philadelphia, remain in deadlock, which makes it difficult to reach the Oct. 1 deadline. Prospects for a new deal are dim.

Shipping analysis agency Linerlytica pointed out that given the current situation, a strike is almost a foregone conclusion, and emphasized that the 14 ports controlled by ILA handled 28.4 million TEUs of container cargo in 2023, with a weekly throughput of nearly 550,000 TEUs. Each week of extension of the strike will lead to the suspension of approximately 1.7% of the global container shipping fleet.

In addition to the wage issue, port automation has become another core point of dispute between the two parties. ILA Executive Vice President Dennis Daggett has made it clear that he opposes automation and believes that technology that improves human work efficiency should be supported, but he firmly resists robots replacing human labor. He vowed to fight the automation trend to the end and firmly believed that ILA would win on a global scale.

However, Lars Jensen, CEO of Vespucci Maritime, warned that the ILA’s determined resistance to automation will lead to higher costs for U.S. imported goods, weaken the international competitiveness of U.S. exporters and hinder overall efficiency improvements. He emphasized that efficient ports are more attractive to shipping companies because they mean shorter dwell times and greater operational efficiency.

Lars Jensen said: “If you were a decision-maker at a shipping company, in which ports would you prefer to deploy the best and most cost-effective ships? Which ports would be more efficient and could significantly reduce ship dwell time, thereby increasing cargo transit time? port; or choose a less efficient port that could keep your precious ship in residence for far longer than necessary?”

Meanwhile, Frank Kenney, director of industry solutions at systems integrator Cleo, predicts a significant increase in traffic should the strike occur at the Canadian ports of Halifax and Montreal, which have emerged as alternatives due to their proximity to the rail network.But he also pointed to challenges in moving freight, particularly through the U.S. Midwest rail system, particularly bottlenecks in Chicago as a hub that can increase shipping times and costs.

The deadlock in negotiations between ILA and USMX not only threatens the normal operations of U.S. ports, but may also have a knock-on effect on the global supply chain. The different stances of the two parties on automation have only exacerbated the complexity of this crisis.

In addition, if U.S. East Coast dock workers launch a strike on October 1, it is predicted that this will affect more than 50% of U.S. container cargo imports, causing a major impact on the global supply chain. HSBC analysis pointed out that approximately 15% of the container fleet globally will also be affected.

Faced with this possibility, the National Retail Federation (NRF) has adjusted its strategy in advance and raised its forecast for container imports in September, aiming to reduce the possible disruption caused by the strike through early loading. However, this move also means that shipments from Asia have reached their peak and may see a significant correction in the coming months. Unless the strike brings an unexpected turnaround, spot prices may be further pressured.

The strike was triggered by a long-standing negotiating deadlock between the International Longshoremen's Association (ILA) and the United Longshoremen's Union (USMX). The ILA has made it clear that if the two sides cannot reach an agreement before October 1, they will take strike action. Although USMX has expressed its willingness to resume negotiations, the firm stance of the ILA wage committee and the tough attitude of the ILA make the prospect of reconciliation still unclear.

HSBC warned that the strike will not only cause container freight rates to rise in the fourth quarter, but may also extend until the end of January before the Chinese Lunar New Year, exacerbating market volatility. In addition, shipping companies have begun to take response measures. For example, Maersk Line has warned of potential shipping bottlenecks and delays of 4 to 6 weeks. Some companies have even transferred cargo to the West Coast to avoid risks.

However, turning to the West Coast is not a foolproof solution. HSBC analysis pointed out that although this move can alleviate import pressure from Asia, it may bring additional burdens to West Coast ports and land cargo evacuation systems. Meanwhile, imports from Europe and Latin America may be held up by limited handling capacity at Atlantic Canada and Mexican ports, further exacerbating supply chain tensions.

More worryingly, strikes at East Coast ports could become a new challenge for global container fleet capacity. In a context where the global shipping fleet is already under pressure due to factors such as the situation in the Red Sea, the strike may re-affect container ship capacity and container shortages, triggering a surge in freight rates. Alphaliner data shows that the total capacity serving the East Coast and Gulf Coast port routes is 4.6 million TEU, accounting for 15% of the total global fleet capacity. These ships may suspend operations during the strike, which will have a negative impact on global trade. far-reaching impact.

Overall, potential strikes at U.S. East Coast ports not only threaten more than half of U.S. container imports, but could also have a knock-on effect on the global shipping market, exacerbating freight volatility and supply chain uncertainty.