When contract negotiations between U.S. East Coast and Gulf Coast longshoremen and their employers abruptly broke down
Aug. 22, the news didn’t catch the majority of shippers and carriers by surprise.
But it has significantly raised the level of concern that members of the International Longshoremen’s Association will strike Sept. 30 when their current contract expires.
According to a survey conducted by American Shipper
last week, 74 percent of shippers and 64 percent of ocean carriers are now more concerned about a potential strike than they were prior to Aug. 22.
The survey, open Aug. 28-31, gathered the opinions of 225 shippers and 25 carriers about how their transpacific plans might have changed with ILA contract discussions at an impasse. The survey only measures the opinions of transpacific shippers because they have ocean options that shippers on the north-south and transatlantic lanes, who are more captive at ILA East and Gulf coast ports, likely don’t if a strike occurs.
The survey found that of the 74 percent of shippers who are more worried now, around one-half is much more worried, while the other half is moderately more worried. Another 23 percent are equally concerned as they were before talks broke down, while only 3 percent are now less concerned than they were before.
On the carrier side, 11 of the 25 respondents said they are much more concerned about a strike, five are moderately more concerned and seven are equally concerned. Only one respondent said they were less concerned now.
Interestingly, carriers indicated they aren’t yet clear how the breakdown will affect their operations. When asked if they will divert sailings away from ILA ports to account for a possible work stoppage, 14 responded that they were uncertain. Six said they wouldn’t divert sailings, while five said they would divert a moderate or significant portion of their calls.
When shippers were asked how and if the breakdown in negotiations had them preparing differently than previously, 44 percent said their contingency plans would remain unchanged. Thirty-six percent said they would now definitely route cargo to the U.S. West Coast to avoid potential disruptions, while 21 percent said they would divert to east coast Canadian ports.
Only 10 percent of shipper respondents said they’re still not worried about a strike and likely won't make major changes to their supply chains.
Two dozen respondents also submitted written replies to the question about how their plans might have changed, with a range of different responses. The most common, however, were that shippers planned to bulk up on inventory, or move “hot” shipments via the U.S. West Coast. Respondents worried that the non-ILA ports may struggle to cope with extra demand induced by an ILA strike.
There’s also the reality that it may already be too late for some shippers to do anything if ILA ports are shuttered Sept. 30. An express ocean service from China to the U.S. East Coast takes more than three weeks, and that’s just the port-to-port leg, ignoring the multi-modal elements that are a basic part of most shipments.
Some respondents said they have contingency plans in place, but have yet to pull the trigger on them, suggesting they are holding out hope a resolution comes to avoid the costs associated with supply chain diversions.
While American Shipper’s
survey did not attempt to gauge concern for shippers to and from South America and Europe, the effects of a strike on those shippers would be devastating.
“The bottom line is that there are only options for transpacific trades, most of which do not add much cost or time and of course had to already be implemented one to two weeks ago as anything leaving Asia all-water to the East Coast or Gulf is too late to change now,” said supply chain consultant Albert Saphir, principal at ABS Consulting. “The transatlantic and North/South lanes have no alternatives really – importers/exporters are completely stuck. Canada ports may offer some relief, but it is the carriers who have to make that choice and capacity is limited. Mexico was also mentioned, but we all know that is not a real choice and also the carriers would first need to go there.”
Saphir suggested a strike could trigger layoffs at companies that rely wholly on East and Gulf coast ports.
“Just think about the (just-in-time) importation of production parts for the automotive industries (U.S. and foreign car makers in the United States),” he said. “All of them depend on parts from Europe and South America. Those lines will come to a halt very quickly. I doubt anyone will have parts in inventory for more than two weeks, possibly even less.”
Whatever the impact, shippers and carriers both were not all that surprised that ILA contracts talks broke down. Whether they see it as posturing before the deadline, only 38 percent of shippers and 32 percent of carriers said they were surprised.
It evidently takes a lot to shake shell-shocked shippers and carriers these days. - Eric Johnson