Port Strike Update: Potential Disruptions and Economic Implications

As the longshoremen’s strike at East and Gulf Coast ports continues, the situation is evolving rapidly, with significant consequences for supply chains and the U.S. economy. Here’s a breakdown of the latest developments.

Vessel Congestion Escalates

As of October 2, more than 45 container vessels are waiting in designated anchorage areas near U.S. ports, according to data from Everstream Analytics. This number has surged from just three vessels on September 29 and 21 on September 30. The combined cargo capacity of these ships now totals over 300,000 TEUs (twenty-foot equivalent units).

Everstream data also shows most vessels are concentrated outside major ports, with 13 waiting at Savannah, eight at New York, and eight at Norfolk. Notably, there have been minimal diversions to other ports in the Bahamas, Mexico, or the West Coast, likely due to ocean carriers’ hopes for a swift resolution of the strike. However, if the strike continues beyond a week without resolution, diversions may become a necessity.

Economic Impact and Supply Chain Disruptions

The implications of this strike are substantial, with estimates suggesting that it could cost the U.S. economy as much as $5 billion a day. Nearly 60% of U.S. imports and 10% of all global container trade move through these ports, highlighting the critical nature of this disruption.

Joseph Firrincieli, Sales Manager at OEC Group New York, a leading NVOCC freight forwarder, notes, “One week of a strike at ports results in approximately one month of congestion, backlogs, and delays.” He warns that as disruptions worsen, consumers can expect emptier store shelves and rising prices.

Affected Goods and Timelines

The strike is poised to impact a wide range of products, particularly those imported from Europe, Central America, and South America. Specific commodity figures indicate that 78% of dates, figs, and pineapples come through East and Gulf Coast ports, along with 75% of bananas and 81% of plywood and stone materials. For perishable items such as agricultural goods and pharmaceuticals, disruptions could occur within 1-2 weeks, while general consumer goods might see delays in 3-4 weeks.

A Broader Perspective on Trade

Despite the significant impact on various industries, Ben Ruddell, a professor in the School of Informatics, Computing, and Cyber Systems at Northern Arizona University highlights that the majority of the U.S. economy remains resilient. “The overwhelming majority of the U.S. economy is domestic or reliant on trade with Canadian and Mexican suppliers. So, while this strike is disruptive to some U.S. manufacturers and retailers, it is not an emergency in the short term,” he says.

Price Increases and Container Charges

In a controversial development, when announcing the strike, the International Longshoremen’s Association (ILA) reported that ocean container carriers are now charging $30,000 per container, a dramatic increase from $6,000 just a few weeks prior. However, data from Xeneta, an ocean and air freight rate benchmarking and market analytics platform, suggests this claim may be misleading. As of October 1, average spot rates for shipping containers from the Far East to the U.S. East Coast were around $7,000, with rates from Northern Europe having increased by 50% since late August, still only reaching $2,800 per container.

What’s Next?

As the port strike continues with uncertainty surrounding its duration, the potential for increased congestion and economic fallout looms large. Businesses and consumers alike are bracing for the impacts in the coming weeks while stakeholders are closely monitoring developments as they unfold.