A dockworkers strike is days away. What would it mean for the economy?
A dockworkers strike is days away. What would it mean for the economy?
We’re now just days from a potential dockworkers strike that would stretch down the East Coast and into the Gulf of Mexico. The deadline for labor negotiations between ports and the union representing about 45,000 dockworkers is Oct. 1 — and those negotiations are going nowhere. Dockworkers, represented by the International Longshoremen’s Association, want raises and promises to be protected from disruption due to automation.
So what would a strike mean for the shipping industry and the broader U.S. economy that relies on these ports? And are we in store for another logistics nightmare like what we saw during the height of the pandemic?
Tim Denoyer is vice president and senior analyst at ACT Research. He spoke about this with “Marketplace Morning Report” host Sabri Ben-Achour, and the following is an edited transcript of their conversation.
Sabri Ben-Achour: All things equal, how bad for supply chains, for shipping, would it be if we did indeed see strikes on the East Coast and in the Gulf of Mexico?
Tim Denoyer: It’s pretty bad. There’s a number of negative effects. It certainly doesn’t help the logistics industry on the East Coast. There’s a lot of shifting of freight towards the West. There’s certainly some inflationary effects — probably not necessarily for the trucking and the rail sector. But we think there’s going to be some some inflation on the ocean, and we’re seeing some signs of that already.
Ben-Achour: Unlike with the pandemic, we see this one coming. So are businesses, shippers — the whole supply chain, really — are they responding or preparing?
Denoyer: Yeah, absolutely. We’ve been talking about this for most of the year, and it’s been sort of well-telegraphed. And the talks really broke down back in June. And so I think shippers have done an excellent job planning ahead of this. For those who haven’t, there’s certainly going to be some stress over the next few weeks. But I think the vast majority have.
Ben-Achour: At the same time, the East Coast ports that would be affected handle half of the U.S.’s cargo. Can you really divert all of that to the West Coast? Can the West Coast absorb all of that?
Denoyer: Certainly not, certainly not. For a couple days, sure. But about three percentage points of North American container imports are shifting from East to West this year.
Ben-Achour: That seems like a lot. I mean, is it going to be like the bad days of the pandemic, with ships lined up off the coast and packages delayed? How bad would it get?
Denoyer: Well, we do have the longest queue of container ships off of Southern California since late 2022 right now. But thankfully the surface freight network is much more able to handle this, and railroad capacity is much more available. Trucking capacity is, as well. And so I don’t actually think it’s really even going to move rates for trucking and rail too much, which are still very soft, because we have too much capacity there. So I think it’ll actually be somewhat helpful for trucking on the West Coast, which is one positive of this, because there is overcapacity there. But we’re looking at rates recently, and I don’t see any movement. Those rates are still very, very soft.
Ben-Achour: Do you think that we have become more resilient in general since the pandemic — the supply chains, in particular?
Denoyer: Yeah I think that’s a great question. We’ve definitely added a lot of resilience to the supply chain over the past few years. Part of the reason that I don’t think it’s going to have a huge impact is that I don’t expect [the strike] to last very long. I do think it’s going to be a matter of a few days. Every one day that the port is shut down, it can add five or six days to the logistics network’s congestion. And I think that could become inflationary relatively quickly. And so I think there will be a strike, but I don’t think it’ll last more than a few days.
Ben-Achour: And when you say you don’t think it’ll last, you mean the president would intervene and shut it down?
Denoyer: Yeah, that’s the avenue — the legal avenue — to do it.
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