Summary:
- After 3 full days of striking, the ILA came to a temporary agreement on October 3rd and operations resumed October 4th.. This agreement extends to January 15th, 2025, but if a new contract cannot be agreed upon by then, there are risks for future strikes.
- The East Coast is seeing the highest impact from the strikes, with vessel approach time, or how long it takes for a vessel to berth once it’s within 50 nautical miles of port, up by 100% and import dwell up by 2 days.
- Export dwell for both the Gulf and East Coast has increased by 60% and could continue to rise as ports work through the backlog and Hurricane Milton makes landfall.
- Carriers are claiming force majeure for containers discharged in other ports, meaning shippers will be responsible for transporting these goods to their final destinations.
- Truckload on-time performance fell to a low of 71% last week in the Southeast due to both the influx of volume as the strike ended and flooding and infrastructure damage from Hurricane Helene.
Overview
The International Longshoremen’s Association (ILA), the union representing port workers at 36 ports on the East and Gulf Coasts of the U.S., has ended their strike after 3 days of port closures, coming to an agreement the evening of October 3rd, 2024. While the agreement means that port operations and labor resumes, it only extends to January 15th, 2025. If a new contract cannot be agreed upon by then, there are risks for future strikes.
Expected Impact on Ports
The impact of a strike of this scale is significant; however, due to the quick resolution, the effects have been mitigated. Vessels waiting to berth have decreased by 60% since last week, as ports are diligently working through the backlog.
The map above shows the container vessels near the affected ports along the Gulf and East coasts. While the area remains busy, vessel dwell time is starting to decline from last week’s levels.
The chart above illustrates how long it takes a vessel to berth once it is within 50 nautical miles of the port. Last week on the East Coast, this process took nearly 12 hours—a 100% increase compared to the week prior to the strike. In contrast, the Gulf Coast remained relatively stable. It’s possible the East Coast delays were also influenced by Hurricane Helene, which made landfall at the end of September, mere days ahead of the port strike starting.
The East Coast is also experiencing a larger increase in import dwell time compared to the Gulf Coast, with a two-day rise relative to the week before the strike. However, in the context of historical data, the increases are marginal. While this number may continue to grow as more containers are processed, it is more likely the result of ports extending hours and working through containers ahead of the strike, leaving fewer containers sitting at port during the strike.
Export dwell time has been more affected by the strike than imports. This is because export containers are scheduled to be loaded onto specific vessels along set routes. If those vessels cannot berth and be worked, the exports cannot leave the port. As vessels begin to arrive at ports, this number will likely increase over the coming week. Both the East and Gulf Coasts have seen approximately a 60% increase in export dwell time.
Due to the strike, carriers had started rerouting containers to unaffected ports in the Bahamas, Panama, Canada, and Jamaica. By avoiding closed ports, carriers managed to keep vessel schedules as on track as possible. The most common alternative ports for these containers are Freeport (Bahamas), Puerto Cristobal (Panama), Halifax (Canada), Saint John (Canada), and Kingston (Jamaica), as shown in the visual below.
Some carriers are reporting force majeure for these containers, meaning shippers are responsible for getting them to their final destinations rather than the carriers. This is likely to increase both transit times and costs for containers discharged at these ports.
Impacted Industries
No industry is immune to the impacts of this strike, but there are some industries that rely more heavily on the East and Gulf Coasts than others.
Energy and Petrochemicals:
Gulf Coast ports, especially Houston and New Orleans, handle 60-70% of the U.S. exports of crude oil, refined petroleum products, and natural gas. A significant portion of the petrochemical supply chain, including plastics and chemical feedstocks, also moves through these ports.
Agriculture:
About 60% of U.S. grain and soybean exports flow through Gulf Coast ports, with New Orleans being a major hub for agriculture exports from the Midwest.
Heavy Manufacturing & Machinery:
Gulf Coast ports handle around 25-30% of U.S. exports of industrial machinery and heavy equipment, much of it bound for Latin America and Europe.
Retail and Consumer Goods:
East Coast ports manage 35-40% of U.S. consumer goods imports such as electronics, clothing, and furniture. Ports like New York/New Jersey and Savannah are critical for trade with Europe and Asia.
Many of these imports are destined for the East Coast and Midwest retail markets.
Automotive Industry:
Approximately 30-35% of U.S. automotive imports and exports pass through East Coast ports, especially vehicles and parts from Europe. The Port of Baltimore is a key hub for RoRo (Roll-on/Roll-off) vessels. When the port temporarily halted operations, the industry remained stable by rerouting shipments to nearby ports. However, if a strike occurs in October, disruptions to manufacturing will likely be unavoidable.
Pharmaceuticals and Chemicals:
Approximately 30-35% of U.S. pharmaceutical imports flow through East Coast ports. This includes active pharmaceutical ingredients (APIs) and finished drugs from Europe, India, and other regions.
Food and Beverages:
East Coast ports manage 30-40% of U.S. food and beverage imports, including perishables like produce, seafood, and processed foods from Europe and Africa.
Construction Materials:
Combined, the East and Gulf Coast ports handle about 25-30% of U.S. imports of steel, cement, and other construction materials, primarily sourced from Europe and Latin America.
Impacts to Peak Season
The timing of the strike is critical, as it occurs during the ocean peak season (August through October), when retailers are importing goods for the upcoming holiday shopping period. Since East Coast ports handle 35-40% of U.S. consumer goods imports. There is also a heavy seasonal component to a lot of imports. Goods such as holiday decorations are only in demand prior to the holidays. Retailers will need to be organized and deliberate about container prioritization now that the strike has delayed some of this freight. It is important they work closely with the ports and drayage providers to endure that containers holding anything time sensitive are picked up prior to more routine restocks that are less urgent in nature.
Truckload, Rail, and Air Impacts
Although the strike is confined to ports, it will ripple through other transportation modes. Shippers may choose to bring freight into West Coast ports instead, increasing demand for rail and truckload transportation to move goods across the country. This shift is likely to drive up rates, cause congestion, increase transit times, and make securing capacity more difficult.
The chart above shows current levels of on-time performance for truckload by region. The Southeast has suffered the most, with on-time performance dropping to 71% last week. While this is partly due to Hurricane Helene’s impact, the post-strike volume surge is exacerbating strain on the network.
Air freight is another option, reducing transit times, which may be critical as the holiday season approaches. However, it is the most expensive mode of transportation and has limited capacity. There is also heavy competition for air freight space, particularly from companies like Temu and Shein.
Overall Economic Impacts
Inflation has been a hot topic since the pandemic. The feds have recently cut interest rates for the first time in years, signaling that they feel as though inflation has finally gotten under control. With a strike of this scale, that progress could be rapidly undone. The strike was estimated to cost the economy up to $5 billion per day.
While the strike was likely short enough to avoid major long-term shortages in inventory levels, the consumer habits of panic buying goods such as toilet paper could still lead to shortages of some goods, resulting in increased prices or fewer sales on such goods.
Summary
In summary, while the quick resolution of the port strike has helped minimize its impact, the disruption has still caused significant delays in vessel berthing, export processing, and the movement of goods across multiple industries. Key sectors like energy, agriculture, retail, and automotive are feeling the effects, and the timing during peak holiday shipping season is exacerbating challenges. The strike has also spurred rerouting to alternative ports, increased costs, and potential shortages, all of which could contribute to rising prices for consumers. If similar disruptions occur in the future, the economic consequences could be even more severe.
