U.S. Companies Bracing for Possible Port Strike

By Lisa Baertlein, Timothy Aeppel

LOS ANGELES/NEW YORK (Reuters) – U.S. companies reliant on East and Gulf Coast seaports are importing goods earlier, transferring shipments to the West Coast, and even utilizing costly air freight as a precaution against a possible strike starting Oct. 1. This labor disruption threatens to disrupt supply chains and reignite inflation just ahead of the presidential election.

“This is just another headache after everything else we’ve been dealing with,” said Kenneth Sanchez, CEO of Chesapeake Specialty Products, a global supplier of metallic abrasives and foundry sand additives.

Sanchez’s primary port is Baltimore, which is part of a dozen ports currently involved in contract negotiations between the International Longshoremen’s Association (ILA), representing 45,000 dock workers, and the United States Maritime Alliance. Negotiations are stalled over wage increases.

A potential strike looms just five weeks before an election between Democratic Vice President Kamala Harris and former Republican President Donald Trump, anticipated to focus heavily on economic issues.

Economists from Oxford Economics have estimated that the labor actions, including an ongoing strike by 30,000 Boeing machinists, could slow payroll growth by 100,000 jobs if prolonged into mid-October.

Sanchez faces yet another supply chain issue after a bridge collapse temporarily cut access to the Baltimore port from late March to mid-June. “Things were just starting to get back to normal,” he stated.

He is now considering rerouting shipments via trains to West Coast ports if the ILA members initiate an extended strike affecting ports from Maine to Texas, handling about half of U.S. ocean trade.

STIHL, a German chainsaw manufacturer, is also working on contingency plans to maintain exports from its Virginia-based factory.

Retailers and manufacturers are accelerating their imports of apparel, home goods, and machine parts to avoid potentially being caught with cargo stuck at ports during the strike. This surge has driven U.S. imports to multi-year highs in July and August, worsening the already rising shipping costs linked to rerouting ships due to regional conflicts.

Ronnie Robinson, Chief Supply Chain Officer at Designer Brands, shifted about half of the shoe imports typically routed through the East Coast to the West Coast. He paid up to ten times the usual ocean transit price to airship some products from Brazil.

Robinson states, “People are paying whatever they can to make sure they’re in the front of the queue.”

Despite these measures, he still has 10,000 to 20,000 units in transit on East Coast-bound vessels that remain a concern.

STRANDED CARGO, SOARING RATES

As of Saturday, 42 container ships are set to arrive at the Port of New York and New Jersey, a central point in the ongoing labor dispute, with 13 scheduled after Sept. 30.

In August, the five largest ports on the East and Gulf Coasts together processed roughly 24,766 forty-foot containers daily, valued collectively at $2.7 billion.

Goods like incoming wine and automobile parts from Europe could be particularly affected. Rerouting those products to the West Coast may involve complicated logistics through the Panama Canal or costly air transport, according to logistics experts.

The East and Gulf Coasts manage approximately 75% of all bananas imported into the U.S. Experts advise against rerouting or air-freighting low-value perishables, which would not be financially viable.

In July, the cost to ship a 40-foot container from Shanghai to New York soared to around $10,000. Although rates have slightly declined since, they may surge again in the event of a strike.

Sanchez warns that increased shipping costs will ultimately affect consumers, whether it’s for a car or hardware store part.