Hot on the heels of a Canada-wide rail shutdown, a potential strike at U.S. seaports on the East Coast and Gulf of Mexico is threatening to further disrupt supply chains.
The International Longshoremen’s Association (ILA), which represents roughly 45,000 dockworkers at three dozen seaports from Texas to Maine, have threatened to walk off the job on Oct. 1 if they don’t reach an agreement on a new contract with the United States Maritime Alliance (USMX) of shipping companies.
A work stoppage at the ports could back up cargo there for weeks or even months, experts warn, with implications far beyond the U.S.
“An East Coast port strike would be absolutely devastating to our supply chains in North America,” said Fraser Johnson, a professor at Western University’s Ivey Business School who studies supply chain management.
A large amount of imports to Canada come in through American ports, which on the east coast are able to handle far more capacity than the Port of Halifax and Port of Montreal, the main Canadian shipping points on the Atlantic.
The Port of New York and New Jersey, the largest East Coast port, ships about US$300 billion worth of goods annually and moved 7.8 million 20-foot equivalent units (TEU) last year. By comparison, the Port of Montreal saw 1.5 million TEUs in 2023, and the Port of Halifax handled just over 546,000.
An economic study by Martin Associates last year estimated the annual value of goods handled at the Port of Montreal to be $151.2 billion, while the Port of Halifax does not calculate those dollar values.
Both ports would struggle to take in even a fraction of the goods that would normally enter through the U.S. on top of its regular cargo traffic, Johnson said.
What would the impact be?
If the eastern U.S. ports shut down for even a day, the impact would be severe.
Analysts at Sea-Intelligence, a Copenhagen-based shipping advisory firm, estimated this month that it could take anywhere from four to six days to clear the backlog from a one-day strike.
The analysis predicted a one-week strike in October would not be cleared until mid-November, and a two-week strike could mean that ports would not return to normal operations until 2025.
Global shipping giant Maersk, a USMX member, gave similar estimates in a U.S. market update in early August that warned of “significant” compounding delays in the event of a strike.
Those backlogs could occur right as supply chains are fully recovered from the four-day-long shutdown of Canada’s main railways. Although trains began moving again Monday, Canadian National Railway Co. and Canadian Pacific Kansas City Ltd. have said a full recovery for freight traffic will take weeks.
When B.C.’s longshore workers were on strike for 13 days in 2023, the Port of Vancouver said last week it took many months to clear that backlog, with delayed shipments and overburdened infrastructure struggling to restore normalcy.
The shipping industry has been facing other challenges around the world recently, including an ongoing drought at the Panama Canal that forced authorities to reduce the number of ships that pass through the critical trade channel, and attacks on container vessels in the Red Sea stemming from the conflict in the Middle East that led to costly re-routings.
Throughout all this, inflation has caused shipping and freight costs to soar since the COVID-19 pandemic — and workers are looking to ensure their wages keep pace.
“These are not normal times,” Johnson said.
The National Retail Federation told Reuters that retailers like Walmart and Target are rushing goods into the U.S. to get ahead of a potential strike and prevent shortages during the holiday shopping season.
The West Coast ports are already seeing increased traffic that analysts say reflect uncertainty over the East Coast labour dispute — a flip of what occurred last year during difficult contract negotiations for western U.S. dockworkers.
The International Longshore and Warehouse Union (ILWU) ultimately ratified a new six-year contract that includes a 32-per cent pay increase over that time, which is retroactive to 2022, and improved benefits. The ILA is now aiming for a similar deal.
ILWU international president Willie Adams said his union “stands in solidarity” with the ILA in a letter to ILA president Harold Daggett this month that the east coast union made public.
Where are the negotiations at now?
Talks between the ILA and USMX broke down over the summer but are set to resume in the weeks leading up to the strike deadline. Both sides have requested federal mediation, and the union has scheduled wage scale meetings for early September.
The ILA has railed against what they say is the threat automation poses to jobs at the ports. USMX said in early August its latest proposal “retains the existing technology language that created a framework for how to modernize and improve efficiency while protecting jobs and hours – a priority for our members and the ILA,” along with enhanced pay and benefits.
Daggett has accused the USMX — whose membership also includes global industry leaders like Hapag-Lloyd, MSC and APM Terminals — of “earning billions off the backs of longshore workers” and appears committed to following through on threats of a strike.
“Don’t f— with the maritime unions around the world, we will shut you down,” he said at last year’s ILA convention.
Daggett made US$855,000 in compensation last year, according to U.S. Labor Department filings.
Analysts say the labour disruptions in Canada’s rail industry and the U.S. ports prove the need to make commerce activities in all sectors an essential service. Ports aren’t covered by the U.S. Railway Labor Act that ensures no interruptions to rail activity in the event of job action, while Canada has no legislation of its own to do the same.
“It creates problems for shippers and exporters and importers, and ultimately drives up costs when there’s uncertainty,” Johnson said.
“Ultimately, those costs gets passed on to consumers.”
— with files from Reuters