What the prolonged US port strikes mean for global supply chains

A massive dockworker strike at ports on the US East and Gulf coasts will wreak havoc on global supply chains and the economy, with American consumers facing shortages of popular products if the shutdown lasts too long.

Workers at ports from Maine to Texas went on strike early Tuesday over a dispute over wages and automation. The action, which could have severe consequences for ships carrying billions of dollars in cargo, is the first by the International Longshoremen’s Association (ILA) in almost half a century.

The ILA, which represents about 45,000 port workers, made good on the threat of strikes in 14 main ports after negotiations broke down with the United States Maritime Alliance (USMX) group of employers ahead of the September 30 deadline.

“The top thing here is the duration of the increase in impact,” Lisa DeNight, managing director of national industry research at Newmark, told CNBC’s “The Exchange” Monday.

“If this attack continues for a few days, the implications are, well, rather short, I would say. If this drags on, it has a series of impacts throughout the global economy – not only the US economy. So, the unpredictability of this problem here is really played and its magnitude could throw a giant wrench in the global supply chain,” he added.

DeNight said even a small disruption of just a few days could have “very significant implications for certain industries,” including medicine, automobiles and manufacturing.

The ocean supply chain has been hit hard this year by the conflict in the Red Sea, a long drought that caused the Panama Canal and the Baltimore bridge to collapse.

Even so, Peter Sand, chief analyst at the Xeneta ocean freight rate intelligence platform, said that given that more than 40% of total “container goods” enter the US through ports on the East and Gulf Coasts, “the stake could not be higher.”

Speaking to CNBC’s “Street Signs Europe” on Tuesday, Sand said he expected the strike to last a week.

“We’re seeing the dominoes fall in many stages now. In the beginning, of course, the immediate effects are in the Eastern US and the Gulf Coast, right?” Sand said.

Then there would be a knock-on effect for ships currently queuing outside the port, he said, meaning the next trip to the US with new cargo would be delayed.

“We will see disruptions with some ships being delayed out of Europe and the Mediterranean in late October and early November,” Sand said.

The ships will be delayed leaving Asia in late December and early January – “and that’s actually when the next normal mini-peak in container shipping happens in the lead up to Chinese New Year.”

“So, it’s really a crunch time with so many things in stock now. You can say it’s a perfect storm, but it’s also a really good negotiating position for those who want to strike,” said Sand.

For American consumers, he said the attack could lead to shortages of perishable or temperature-controlled items, such as bananas and other fresh fruits.

The Danish shipping giant Maersk has warned that just one shutdown could take four to six weeks to recover, “with significant backlogs and delays increasing every day.”

In an update published Monday, Maersk said the disruption would cause delays in cargo movements, increased costs and logistical challenges for companies that rely on US East Coast and Gulf ports. Prolonged labor disputes, the company added, may have contributed to the disruption.

Not everyone is concerned about the wider economic ramifications of US port strikes, however.

Bradley Saunders, North American Economist at Capital Economics, said in a research note published late last month that the strike action will not cause major economic disruption because – despite previous denials – US President Joe Biden will have “little choice” but to intervene and get back-to-work legislation before the November election.

Biden said he would not use existing labor laws to force workers to unionize again, which is within his power under the Taft-Hartley Act.

Passed in 1947, the Taft-Hartley Act was a revision of US laws governing labor relations and union activities that gave the US president the power to suspend strikes during an 80-day “cooling off period” when “national health or security is in need.” ” is at risk.

“Frequent surprises for the supply chain in recent years have made producers more attuned to the risk of opening low inventories,” said Saunders on September 25.

“That’s how the company will take preventive measures in case of an attack – not least because the possibility has been mentioned by the ILA for months,” he said.

— CNBC’s Lori Ann LaRocco contributed to this report.