As the International Longshore and Warehouse Union (ILA) and the United States Maritime Alliance (USMX) have continued to be deadlocked in negotiations over wage growth and port automation, ports in the eastern United States and along the Gulf of Mexico are facing a seemingly inevitable strike.

The USMX recently stated that despite the upcoming expiration of the current agreement in three weeks, both parties still hope to reach a consensus on new contract terms to avoid an unnecessary and damaging strike for both sides, provided that the ILA meets their demands. However, the ILA insists on completing local-level negotiations before signing a national contract, and dockworkers and employers in multiple regions, such as Jacksonville, Tampa, and Philadelphia, remain deadlocked, casting doubt on the prospect of reaching a new agreement before October 1st.

Shipping analysis firm Linerlytica noted that given the current situation, a strike appears almost inevitable, emphasizing that the 14 ports controlled by the ILA handled 28.4 million TEUs of container cargo in 2023, with a weekly throughput of nearly 550,000 TEUs. Each additional week of a strike would result in the suspension of approximately 1.7% of the global container fleet's capacity.

Beyond wage issues, port automation has emerged as another central point of contention between the two parties. Dennis Daggett, Executive Vice President of the ILA, has expressed clear opposition to automation, advocating for technologies that enhance human labor efficiency but firmly resisting the replacement of human labor by robots. He vows to fight the automation trend to the end and believes that the ILA will prevail globally.

However, Lars Jensen, CEO of Vespucci Maritime, warns that the ILA's steadfast opposition to automation will lead to increased costs for US imported goods, weakening the international competitiveness of American exporters and hindering overall efficiency gains. He emphasizes that efficient ports are more attractive to shipping companies as they imply shorter dwell times and higher operational efficiency.

Lars Jensen stated, "If you were a shipping company decision-maker, which ports would you prefer to deploy your best and most cost-effective vessels? Would you choose those with efficient services that significantly reduce vessel dwell time, thereby increasing cargo transit time, or those with lower efficiency that might cause your valuable vessels to stay longer than necessary?"

Meanwhile, Frank Kenney, Industry Solutions Director at system integrator Cleo, predicts that if a strike occurs, the volumes handled by the ports of Halifax and Montreal in Canada will increase significantly, as these ports serve as alternative options due to their proximity to railway networks. However, he also highlights the challenges in cargo transportation, particularly through the Midwestern US railway system, especially the bottleneck issue with Chicago as a hub, which may increase transit time and costs.

The negotiation deadlock between the ILA and USMX not only threatens the normal operations of US ports but also risks causing a ripple effect on the global supply chain, with the differing stances on automation further complicating the crisis.

A strike at US East Coast ports would impact over half of the country's imports. If dockworkers on the US East Coast go on strike on October 1st, it is predicted to affect more than 50% of the country's container cargo imports, causing significant disruptions to the global supply chain. HSBC analysis points out that approximately 15% of the global container fleet would also be impacted.

In response to this possibility, the National Retail Federation (NRF) has adjusted its strategy in advance, raising its forecast for September container imports, aiming to mitigate potential disruptions from the strike through early loading. However, this move also implies that shipments from Asia have peaked, and a significant pullback may occur in the coming months unless the strike unexpectedly resolves, which could further pressure spot prices.

The spark for the strike lies in the long-standing negotiation deadlock between the International Longshore and Warehouse Union (ILA) and the United States Maritime Alliance (USMX). The ILA has made it clear that if no agreement is reached by October 1st, a strike will be initiated. While the USMX has expressed willingness to resume negotiations, the firm stance of the ILA's wage committee and the union's hardline attitude have left the prospects for a settlement uncertain.

HSBC warns that a strike would not only lead to an increase in container freight rates in the fourth quarter but could also extend into late January of the following year, before the Chinese Lunar New Year, exacerbating market volatility. Additionally, shipping companies have already begun taking countermeasures, with Maersk Group warning of potential shipping bottlenecks and delays of 4 to 6 weeks, while some companies have even rerouted cargo to the West Coast to avoid risks.

However, shifting to the West Coast is not a foolproof solution. HSBC analysis points out that while this move can alleviate import pressure from Asia, it may impose additional burdens on West Coast ports and land cargo evacuation systems. Simultaneously, import cargo from Europe and Latin America may get stranded due to limited handling capacity at Canadian Atlantic ports and Mexican ports, further exacerbating supply chain tensions.

More worryingly, a strike at East Coast ports could emerge as a new challenge for the global container fleet's capacity. Amidst the existing pressures on the global fleet due to factors such as the situation in the Red Sea, this strike could reintroduce disruptions to container ship capacity and exacerbate container shortages, triggering freight rate surges. According to Alphaliner data, the total capacity serving East Coast and Gulf Coast port routes stands at 4.6 million TEUs (Twenty-foot Equivalent Units), accounting for 15% of the global fleet's total capacity. These vessels may suspend operations during the strike, having profound implications on global trade.

In summary, the potential strike at US East Coast ports not only threatens more than half of the country's container imports but also risks causing ripple effects in the global shipping market, intensifying freight rate volatility and supply chain uncertainty.