US Dockworkers Launch Strike After Labor Contract Expires

USMX said on Monday it was "hopeful" after the two sides exchanged counteroffers. However, there was still no deal when the six-year contract expired at midnight.

The walkout marks the ILA's first since 1977 and follows other high-profile strikes at U.S. automakers, Boeing and other employers.

The contract directly affects about 25,000 ILA members at 14 large U.S. ports, including New York/New Jersey, Boston, Philadelphia, Savannah, New Orleans and Houston.

“Some shippers estimate that for every one week of an ILA strike, it will take 4-6 weeks to fully recover and could cost the economy up to $5 billion per day,” according to supply chain visibility platform project44. Because we are in the midst of the ocean peak season, project44 expects an immediate impact, reporting over 100 vessels are estimated to arrive at the ports this week.

The union is pressing for protections against automation-related job loss and for hefty wage hikes after dockworkers kept providing essential services throughout the Covid-19 pandemic.

USMX said Monday its latest offer would "increase wages by nearly 50 percent, triple employer contributions to employee retirement plans, strengthen our health care options, and retain the current language around automation and semi-automation."

Media reports say the ILA is asking for a 77% wage increase over six years.

President Joe Biden, a close ally of organized labor, has so far ruled out federal intervention, citing the need to respect collective bargaining rights.

Supply Chain

The shutdown is widely expected to have a massive and immediate impact on the supply chain.

“Unlike the major strike in the 1970s, the world has changed—our reliance on the global economy and supply chains is far greater now. Manufacturing processes, price points and consumer conditioning have evolved,” says Pawan Joshi, EVP of products and strategy at supply chain platform e2open.

"The strike threatens to compound an already stressed system. Ports on the U.S. East and Gulf Coasts are the critical gateways for essential goods," says Brandon Daniels, CEO of AI supply chain management company Exiger. "We’re looking at a supply chain logjam."

“All industries will be impacted by the strike, but some of the most impacted will include energy, petrochemicals, agriculture, manufacturing and machinery, automotive, retail and consumer goods, pharmaceuticals, chemicals, food and beverage and construction materials,” according to project44.

The platform also reports the Gulf Coasts handle about 25-30% of U.S. exports of heavy equipment and industrial machinery, and East Coast ports handle approximately 30-35% of U.S. automotive imports.

“As a lot of focus this year has been on increasing reshoring efforts to bolster U.S. manufacturing, the inability to import raw materials could pose a serious blow to U.S. manufacturers," says Adhish Luitel, principal analyst at tech intelligence firm ABI Research.

John Lash, e2open group vice president of product strategy, says, “It’s not just about the value of the delayed imports and exports; it's about the critical role these components play in manufacturing. For instance, a $10 part is essential for a $50,000 vehicle. Not having these parts can significantly impact production. This creates an amplification effect within the manufacturing chain, as opposed to merely affecting consumer distribution where products go straight onto shelves."

project44 predicts an increase demand for rail and truckload transportation if shippers divert freight to the West Coast, potentially causing higher transit times and congestion. The platform says shippers could also opt for air freight, but this mode is costly and has lower capacity levels.

“Air shipping is 5-10 times more expensive and has a much larger carbon footprint,” says Joshi.

Brian Pacula, supply chain and ocean freight expert at digital services firm West Monroe, says, “Consumers can certainly expect higher prices in the near term and will face emptier shelves down the line.” He says there may also be additional consumer hesitation to spend due to inflation.

“In these scenarios, there are always winners and losers. Suppliers and manufacturers are likely to be the losers, while carriers could benefit due to increased prices,” says Lash.

Despite the bleak outlook, some experts have hope that the U.S. can avoid a major blow to the supply chain and economy.

"Some companies have diversified their ports as a lessons-learned from COVID and should be fairly nimble in switching to alternative ports. Also, the strike has been looming for many months now, giving supply chains the opportunity to prepare," says Fred Hensel, KPMG industrial manufacturing supply chain leader.

“This situation is unlikely to persist for long, given the urgency to find a resolution; for instance, the Canadian rail strike was resolved quickly due to the significant stakes involved,” says Lash.

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