Largest port on East Coast begins preparations for a strike

Executives at the Port of New York/New Jersey told CNBC they have begun preparing for a possible total shutdown of the International Longshoremen's Association, North America's largest union. The ILA represents more than 85,000 longshoremen, and the Oct. 1 strike will shut down five of the 10 busiest ports in North America, as well as a total of 36 ports on the East and Gulf Coast. Billions of dollars in monthly trade are at risk as unions inch closer to an Oct. 1 deadline to sign new contracts. Cruise operations will continue.

Negotiations with the port's ownership collapsed this summer, and it's unclear how much progress, if any, has been made. Rank-and-file members of the International Labor Association recently voted unanimously to authorize the strike, while the American Maritime Union, a group representing port management, recently said it believed the union had made the decision to strike.

Beth Rooney, director of the Port Authority of New York and New Jersey, told CNBC on Thursday that individual ocean carriers and terminal operators are announcing reduced operations to avoid container build-ups. The Port of New York/New Jersey has been in discussions with ocean carriers and terminal operators regarding cargo management prior to the disruption to ensure appropriate measures are in place to complete the transfer of cargo from terminals prior to terminal closures.

“Many ocean carriers have announced plans to ban export cargo from the Midwest to the East Coast,” Rooney said. “So the farther the cargo has to travel from the interior to us, the sooner it will be embargoed,” she explain. “If a strike occurs and operations cease, vessels will either wait in designated areas or slow down sailing to delay arrival, as they did during the COVID-19 pandemic. Once the strike is over, the Coast Guard will lead the charge in an orderly movement of vessels into the port.”

In a recent blog post, Jim Mancini said: CH RobinsonNot only will U.S. companies and suppliers be affected, but supply chains in Europe, Oceania, Latin America and Asia will also be affected, the vice president of surface transportation for North America wrote.

“While the Asia-Pacific region generally has more options for moving freight to the West Coast, more than half of all vehicle freight traffic currently relies heavily on the East Coast. For example, the corridors from Germany to Charleston and Savannah are critical to European automakers because if In the event of a strike, the route will be closed.

As CNBC first reported, the Biden administration said it would not invoke its powers under the Taft-Hartley Act to force union members to return to work and urged all parties to return to the bargaining table. “We have never invoked the Taft-Hartley Act to stop a strike and are not considering doing so now,” a Biden administration spokesperson told CNBC on September 4.

ILA president Harold Daggett recently warned at a union conference that members would deliberately slow down work if they were forced to return to work. This will only increase the accumulation of containers, thereby reducing the liquidity of the supply chain.

The Port of New York/New Jersey has joined other ports in publicly releasing strike contingency plans.

For example, the Port of Houston has issued strike preparation Provide guidance to customers. The port said it may extend gate opening hours during the week of September 23, if necessary. It is also scheduled to open its doors on Saturday, September 28, with details to be confirmed early next week.

Ships planning to enter East Coast and Gulf ports have been at sea since early to mid-August.

In an advisory to customers, the Georgia Ports Authority recommended making import deliveries “as early as possible by October 1 to minimize any disruption,” adding that it would provide weekend gates to support the effort. Regarding exports, the port explained that refrigerated and non-refrigerated containers will be received by September 30.

The contingency plans are the result of a six-year contract impasse between the International Longshoremen's Association and the American Maritime Alliance. There is a big gap between the two sides in terms of wages and automation. ILA announced on June 10 that it was suspending negotiations on the use of automated gate systems at Mobile, Alabama and other ports.

Logistics experts told CNBC that large amounts of cargo have been flowing from coast to coast in recent months in anticipation of possible strikes.

Port of Long Beach CEO Mario Cordero expects cargo volumes to increase and the company is well-positioned to handle the increase if worker strikes do occur at Eastern and Gulf Coast ports. August was the strongest month in the port's 113-year history, with imports up 40.4% year-on-year and exports up 12% year-on-year.

“Our terminal operators are also prepared to flexibly adjust boarding times as needed, and our overflow site, located at Pier S, is The Short-Term Overflow Resource Storage (STOR) facility is open and has available capacity.

In recent comments to rank-and-file union members, Daggett also referenced the ILA's last strike in 1977, when Daggett was one of the ILA members who traveled to the West Coast during the 44-day strike to secure support among West Coast port workers. its union.

Gene Seroka, executive director of the Port of Los Angeles, told CNBC, “I believe what Harold (Daggett) has to say, and I don't have any evidence at this time that cargo ships that normally go to the eastern Gulf of Mexico are turning left. “There's a decades-long tradition among labor organizations that one organization won't take advantage of another organization's collective bargaining process, and as you said, that hasn't happened since the 1970s. I don't think that's the case. Will happen again here.

ILA did not respond to a request for comment.

The Port of Los Angeles handled a near-record 960,597 twenty-foot equivalent units (TEU) in August, a 16% increase from the previous year. This month is the busiest non-pandemic month ever for the port. With only 8 months until 2024, the Port of Los Angeles is 17% ahead of the 2023 pace and has already added nearly 1 million containers compared to last year.

Concerns about supply chain congestion

The maritime industry has already made predictions about congestion levels. The Marine Intelligence Service estimated that the ILA's one-day attack would take five days to clear. A week-long strike in October could lead to a slowdown by mid-November. Two weeks into January due to ship congestion and container backup.

This year's peak season has been moved up a month earlier due to concerns about a union strike, as shippers want to ensure their holiday product arrives before shutdowns.

According to Xeneta data, import tonnage for labor processing on the East Coast decreased by nearly 2% between the fourth quarter of 2023 and the second quarter of 2024.

The East Coast's share of total U.S. container imports from the Far East fell from 34.4% in the fourth quarter of 2023 to 32.6% in the second quarter of 2024. 57.7% rose to 60% in the second quarter of 2024 (the remaining containers were imported through the U.S. Gulf Coast).

The trade diversion affects ILA workers as they receive royalties based on the number of containers transported.

Miter analysis commissioned by the U.S. Chamber of Commerce estimates that the 30-day strike will be concentrated at ports of New York and New Jersey could have an economic impact of up to $641 million per day. In Virginia, the economic impact is expected to be $600 million per day, or approximately $18 billion over 30 days. The Houston operations could have an export impact of $51 million per day and an import impact of $41.5 million per day.

Shipping companies told CNBC they are continuing to reroute containers. Seko Logistics is moving some customers to the West Coast and moving containers eastbound by transshipping from the West Coast to help relieve some congestion.

“We are closely monitoring the situation and will proactively communicate with customers regarding any operational actions that may be necessary,” a CSX spokesperson told CNBC.

Goetz Alebrand, head of ocean freight for the Americas at DHL Global Forwarding, told CNBC the company is diversifying customer routes and transshipments. “We also use peel piles to manage the flow of containers,” Allebrand said. “We are aware of the backlog caused by the limited supply of train cars on certain lanes, and our teams are actively working to explore additional rail and trucking options to minimize disruption.”

Air freight, although more expensive, is an alternative for time-sensitive or high-value shipments.

Paul Brashier, vice president of global supply chain at ITS Logistics, told CNBC that the company has implemented post-COVID-19 and 2018 tariff emergency actions.

“We repositioned truck chassis and grouped trucks in the Southeast, Gulf and Mid-Atlantic regions to maximize volume at ports with extended hours. We then placed the containers on our expanded yards, for later delivery.