The International Longshoremen’s Association (ILA), representing around 25,000 dockworkers, plans to walk off the job unless port operators agree to wage increases and limits on automation. These ports handle nearly half of US container imports, including essential goods such as food, pharmaceuticals, electronics, and clothing.
According to The Financial Times, analysts from JPMorgan estimate that the strike could cost the US economy as much as $5 billion per day. US retailers, automakers, and other businesses are preparing for the disruption by pulling forward shipments and increasing inventories. However, this has pushed up freight costs by as much as 20% due to the need for extra warehousing space and logistical adjustments.
Data from shipping analysts Xeneta, cited by the paper, shows that the cost of shipping a 40ft container from northern Europe to the US east coast has risen 29% since the end of August.
Douglas Kent of the Association for Supply Chain Management told The Financial Times that US infrastructure is not equipped to shift such a large volume of goods to the west coast, leading to further potential delays. Additionally, global supply chains could face further strain if the strike goes ahead, as the availability of vessels may become limited, ultimately driving up shipping costs worldwide.
If the strike continues for more than a week, businesses fear empty shelves and rising prices similar to the disruptions seen during the Covid-19 pandemic, according to The Financial Times.
While large companies have started to reroute shipments and stockpile goods, smaller businesses are more vulnerable to delays. Chris Butler, CEO of holiday decor retailer National Tree Company, told The Financial Times that 15% of his company’s goods could be stranded if ports close.
Global shipping companies such as AP Møller-Maersk and Hapag-Lloyd have already announced surcharges to cover higher operational costs during any potential disruption. The Financial Times reports that Maersk plans to charge an additional $1,500 per 20ft container if the strike occurs.