The strike risk among US East Coast and Gulf Coast longshore workers at the start of October is becoming increasingly likely. We are seeing higher inventory levels being shipped ahead of peak season as companies prepare for the possibility and are working to mitigate potential delays. Let’s dive into the latest updates and discuss how to reduce risks in your supply chain.
ILA Strike Looms on the Horizon
The current contract between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) will expire on September 30, 2024. Negotiations have been ongoing without the ability to reach an agreement.
The USMX-ILA Master Contract, last ratified in September 2018, governs approximately 14,500 US East and Gulf Coast port workers. Negotiation talks stalled in early June after the ILA discovered that an Auto Gate system that autonomously processes trucks was being used in multiple locations, bypassing ILA labor.
The ILA said that it would only meet with USMX once the Auto Gate issue is resolved, and earlier this month, it announced plans to update its contract demands. They have called for a delegates meeting to be held next week on September 4-5 to discuss demands and strike strategy.
Similar negotiations were held last year with West Coast dockworkers. The Pacific Maritime Association was able to reach a labor agreement with the help of the Biden Administration. However, Harold Daggett, ILA President and the union’s Chief Negotiator, has indicated that they are not interested in any help or interference from outside agencies nor in extending the current contract.
What Would a Strike Mean
The ILA is North America’s largest union of maritime workers, representing 85,000 longshore workers along the East Coast, Gulf Coast, Puerto Rico, Great Lakes, and major U.S. rivers. The strike would affect six of the ten largest US ports, disrupting crucial levels of cargo volume.
The strike would cause significant congestion and delays in the supply chain just as companies are gearing up for the holidays. Experts indicate that a one-week strike at the start of October would take up to 6 weeks to recover and cost companies billions per day. This is on top of ongoing issues in the industry as shippers continue to avoid the Red Sea and face volume limitations in the Panama Canal.
There are also concerns that rates will collapse for ocean carriers in Q4. The market has already seen a surge in transpacific rates with just the threat of a port strike and is currently significantly higher from Asia to the US East Coast and from Asia to the US West Coast than a year ago.
How to Mitigate Your Risks Proactively
- Scenario Analysis – with baselines in place, Solution Design teams can analyze various scenarios to identify optimal strategies for your supply chains that will reduce or mitigate risk and increase your resiliency for recovery. This analysis should include the exploration of alternative routes and/or modes.
- Contingency Planning – it is essential to begin developing contingency plans now whether you want to move forward with adjusting shipping plans or wait to see if the strike occurs. You could consider redirecting shipments to smaller ports or alternative locations, such as Mexico, Canada, or the West Coast or even changing modes, such as using Air Freight for shipments. However, it is also important to note that costs are likely to increase significantly if a strike occurs.
- Plan for Delays – while the market is already facing numerous delays in the global supply chain, anticipate and plan for potential delays as rerouting can lead to capacity issues in other locations not equipped for higher volumes as well as inclement weather risks in areas such as Canada as we move closer to the winter months.
- Cargo Insurance – review your insurance coverage now and thoroughly understand your company’s level of protection against the financial risks of port strikes. It is recommended that insurance coverage be reviewed and updated regularly to account for changing risks in the market.
- Inventory Management – analyze your inventory needs and consider increasing inventory ahead of the holiday season and ahead of the potential strike to minimize the impact and risk of added costs for expedited shipments.
Our team is continually monitoring the market and potential risks, and we are also working closely with our customers to develop contingency plans in the case of a strike. Additionally, we are in discussions with our partner carriers in Europe, working collaboratively to minimize the risk of disruptions.
Reach out to your TOC representative representative to discuss any concerns you may have with your shipments in the coming months.