What a long US port strike could mean for global supply chains

A massive strike by dock workers at ports on the US East and Gulf coasts is expected to wreak havoc on global supply chains and the economy, with US consumers seeing shortages of popular products if the work stoppage lasts for a long time.

Workers at ports stretching from Maine to Texas went on strike early Tuesday in a dispute over wages and automation. The action, which is likely to have serious consequences for ships carrying billions of dollars in cargo, is the first by the International Longshoremen’s Association (ILA) in nearly half a century.

The ILA, which represents about 45,000 dock workers, followed through on its strike threat at 14 major ports after talks with the United States Maritime Alliance (USMX) employer group broke off ahead of a September 30 deadline.

“The top take here is that duration amplifies impact,” Lisa DeNight, managing director of national industry research at Newmark, told CNBC’s “The Exchange” on Monday.

“If this strike goes on for a few days, the effects are probably short-lived, I would say. The unpredictability of this issue here is really in play and it has the magnitude to really throw a huge wrench into global supply chains,” he added.

DeNight said even a brief outage of just two days could have “really significant impacts for some industries,” including pharmaceuticals, autos and manufacturing.

Ocean supply chains have already been hit hard this year conflict in the Red Sea, a long drought that affected the Panama Canal and the collapse of the Baltimore Bridge.

Even so, Peter Sand, chief analyst at ocean freight intelligence platform Xeneta, has he said that since more than 40% of all “container cargo” enters the US through ports on the East and Gulf Coasts, “the stakes could not be higher.”

Speaking on CNBC’s “Street Signs Europe” on Tuesday, Sand said he expects the strike to last for a week.

“We’re seeing the dominoes fall in multiple stages now. At first, of course, the immediate effect is in the eastern US and the Gulf Coast, right?” said Sand.

There will then be a knock-on effect for ships currently queuing outside the ports, he added, meaning their next trips to the US with new goods will be delayed.

“We will see disruption with some ships being delayed out of Europe and the Mediterranean towards the end of October and the beginning of November,” Sand said.

Ships will be delayed leaving Asia towards late December and early January — “and that’s essentially when the next regular mini-peak in container traffic will happen in the run-up to Chinese New Year.”

“Well, it’s really crunch time with so many things at stake now. You might say it’s a perfect storm, but it’s also a really good bargaining position for those people who want to strike,” Sand said.

For American consumers, he said the strikes could soon lead to shortages of perishable or temperature-controlled goods such as bananas and other fresh fruit.

Danish shipping giant Maersk has warned that just a one-week shutdown could take four to six weeks to recover, “with significant delays and delays worsening with each passing day.”

In an update published On Monday, Maersk said the outage would likely lead to cargo handling delays, increased costs and logistical challenges for companies dependent on US East Coast and Gulf ports. A long labor dispute, the company added, could exacerbate these disruptions.

However, not everyone is as concerned about the broader economic impact of strikes at US ports.

Bradley Saunders, North America economist at Capital Economics, he said in a research note published late last month that the strike was unlikely to cause much economic disruption because — despite denials beforehand — US President Joe Biden would have “little choice” but to step in and invoke the legislation on return to work. of the November elections.

Biden said he would not use existing labor laws to force union members back to work, which falls under his authority under the Taft-Hartley Act.

Passed in 1947, the Taft-Hartley Act was a revision of US law governing labor relations and union activity that gave a US president the power to suspend a strike for an 80-day “cooling off period” in cases where ” national health or security “are at risk.”

“Frequent shocks to supply chains in recent years have left producers more attuned to the risks of running out of low inventories,” Sanders said on Sept. 25.

“It is therefore likely that companies will have taken precautionary measures in the event of a strike – not least because the possibility has been touted by the ILA for months,” he added.

— CNBC’s Lori Ann LaRocco contributed to this report.