Port Workers Suspend Three-Day Strike…At Least for Now
According to the International Maritime Organization, 90% of all internationally traded goods are carried on ships at some point during their transit. Here in the U.S., a vast network of ports spread out across the west, east and gulf coasts serve as vital hubs for those cargo ships. These ports act as a gateway for the movement of goods into and out of our country.
But on Tuesday morning, the International Longshoremen’s Association (ILA) announced that roughly 45,000 dockworkers at 36 ports on the east and gulf ports would go on strike. The ILA’s current six-year contract expired at midnight on Monday. The ILA had been in negotiations with the United States Maritime Alliance (USMX), which represents the port owners. The last time the ILA went on strike was in 1977.
One of the main sticking points in negotiations was the use of automation at the ports. The ILA was demanding a complete ban on the automation of cranes, gates and container-moving trucks used in the loading and unloading of freight. The USMX has agreed to accept some limitations on automation but is holding firm on an outright ban.
The other area of contention was over salary. The ILA was demanding a 77% pay raise over the six-year life of the new contract. The USMX has countered with a 50% pay hike.
On Thursday night, however, the ILA announced it had suspended its strike after just three days. The ILA and USMX agreed to a tentative deal on wages where workers will now receive a 61.5% salary increase over six years. They also agreed to extend their current contract – which technically expired on Monday – through Jan. 15 to allow further time for additional negotiations on unresolved issues, specifically the use of automation at ports.
The tentative deal does avoid a strike until Jan. 15. But that doesn’t mean a strike won’t resume once the Jan. 15 cooling off period ends. Where both sides have dug in their heels the deepest is automation. Last month, ILA executive vice president Dennis Daggett labeled the use of automation at ports a “cancer,” and said negotiating positions with the USMX on this position are “very, very far apart.”
The ramifications of a strike are substantial, especially to America’s supply chains. According to the National Association of Manufacturers, roughly 68% of all ocean-going containerized exports and 56% of all containerized imports pass through the east and gulf coast ports. America’s west coast ports process the remaining volume. Not only does a strike shutdown the movement of finished goods, but it also disrupts the flow of parts, supplies and raw materials to America’s manufacturers and producers.
JP Morgan estimates the three-day strike will cost the U.S. economy roughly $5 billion per day in lost economic growth. The strike also creates a growing backlog of cargo containers either sitting at the ports or on waiting ships lined up in the harbor. According to global freight analytics company Sea-Intelligence, a one-day strike would take five days to clear. A one-week strike would cause delays until mid-November.
As we saw during the COVID pandemic, disruptions to supply chains can lead to rising prices for American families. Because there are now fewer goods on store shelves and in business inventories, consumer demand creates an upward pressure on consumer prices. American families have already been struggling with high inflation for nearly four years. The last thing they need is yet another surge in prices.
Mark M. Grywacheski, Investment Advisor
Quad Cities Investment Group is a Registered Investment Adviser.
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