The global supply chain is disrupted after dock workers on strike in ports along the east coast and Gulf Coast of America. The industrial action in 36 ports that handle half of America’s shipping by ocean has caused delays for container traffic from Maine to Texas.
The strike started in the early morning hours of Tuesday after the talks between the International Longshoremen’s Association and the United States Maritime Alliance group (USMX), which represents the employers, reached an impasse.
USMX’s offer of a 50% pay increase over six years and the promise to limit automation was rejected by ILA. ILA demanded a 77% pay increase over six years and a ban on all automation. The union claims that the massive pay increase is necessary to compensate for inflation and years with small pay increases. The average salary for union members is $81,000 per year. However, some earn more than $200,000.
The ILA’s coast-wide strike marks the first time since 1977 that they have been on strike. According to Sea Intelligence a Copenhagen based shipping consultancy, if a two-week strike occurs, ports may not be able to return to normal operation until 2025.
According to the National Association of Manufacturers, the strike will disrupt supply chains in the manufacturing industry throughout the US. Jay Timmons said that access to east and gulf coast ports is crucial for the production of billions of dollars worth of goods, from vehicles to electronic devices.
Retailers and logistics companies have developed plans to reduce the impact of this strike. Ronnie Robinson is the chief supply chain officer for DSW’s parent company Designer Brands. He said that the company had shifted the majority of its imports from the east coast to west coast. He stated that his company would not risk making late deliveries to customers such as Macy’s Nordstrom and Dillard’s department store, even if they had to pay more for shipping.
Andreas Stihl is a German chainsaw maker that said they were working on contingency planning to ensure exports from their factory near Port of Virginia. Stihl’s US facility ships to over 80 countries.
Inter Ikea, the company that makes Ikea furniture said it was still too early to comment about any potential constraints a strike could have on its supply chains. The manufacturer issued a statement saying: “We closely monitor the situation and are hopeful for an agreement to be reached between the parties as quickly as possible.”
JP Morgan analysts estimate that the strike will cost US businesses $5 billion per day. This is due to the disruption of shipments from terminals in New York, Baltimore, and Houston.
Bradley Saunders of Capital Economics’ North America office said that the strike at East Coast and Gulf Coast ports was unlikely to cause major economic disruption. Many retailers made plans to prepare for the strike. We believe that President Biden, despite recent denials and this close to an election, will have no choice but to intervene and implement back-to-work laws if both sides cannot reach agreement.
An official at the White House said Monday that the Biden Administration has been in constant communication with the ILA, and the Alliance to move the negotiations forward and settle the dispute fairly.
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