Port Strike: Can West Coast Ports Absorb East Coast and Gulf Import Volumes?

A potential strike unionized dock workers could begin Tuesday at East Coast and Gulf Coast ports, raising questions about whether West Coast ports are a viable alternative destination for unloading cargo.

The International Longshoremen’s Association (ILA), which represents 45,000 dock workers, and the US Maritime Alliance (USMX) which represents dock employers are at an impasse in negotiations over the union’s demands for compensation and protection from automation. The union’s current six-year contract expires Monday evening, raising the prospect of the ILA’s first strike since 1977.

While time is running out between the two parties to reach an agreement that avoids a work stoppage, the possibility of a 36-year strike by dock workers East Coast and Gulf Coast Seaports could block about half of the country’s import volume, raising questions about whether shipments could be rerouted to the West Coast.

Douglas Kent, executive vice president of corporate and strategic alliances at the Association for Supply Chain Management (ASCM), said in an interview with FOX Business that while it makes sense to consider alternative destinations to mitigate risk, “West Coast ports they can’t handle an additional 50% of the goods pass through there.”

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“We have severe limitations on passage through the Panama Canal due to drought, so even that is not always the answer,” Kent said. “This is an additional shipment of more than a week, assuming there is no backlog on the other side. So the cost associated with rerouting a shipment is also not to be underestimated.”

Kent explained that because East Coast and Gulf ports handle more shipments to and from Europe, while West Coast ports handle the majority of trade with Asia, there are capacity and cost considerations that influence decisions about redirect shipments.

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“I don’t think we’re going to see a lot of alternative movement. I think the West Coast ports are preparing for an increase in volume associated with this. But their ability to absorb almost 50% of the traffic import volume is not even a remote possibility “Kent said.

“What they don’t want to do is inadvertently put a strain on their own business,” he explained. “So I think you have to keep that factor in mind as well in terms of any potential redirection. They will accept an acceptable volume that doesn’t put undue stress on their existing capabilities and disrupt their existing customer base because their customers that they have have been loyal to them and they’ve worked their way through them, they don’t want to disrupt that.”

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Port of Los Angeles Executive Director Gene Seroka said in an interview on FOX Business Network: “Cavuto: from coast to coast” that “very few people win when it comes to situations like this. These workers must be paid. Companies must continue to reinvest and import goods, which creates jobs from Maine to Texas for this great union and its employers association.”

Host Neil Cavuto asked Seroka about the timing of the potential port strike ahead of the holiday season on shoppers’ ability to access high-demand products.

“The timing couldn’t be worse,” Seroka said. “We’re on the cusp of the holiday season for retail. And let’s just put aside for a second the big box retailers, who had the means to frontload cargo and get it through other ports and set up their inventory. It’s that small. .. to the medium-sized businesses that I deal with, they’re running these last 12 weeks before the holidays to pay salaries and keep their businesses profitable, that’s what’s at risk right now.”

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West Coast ports are popular Los Angeles, Long Beach, Oakland and Seattle-Tacoma are major seaports that could be destinations for rerouted shipments. Port operators do not expect a significant impact.

“We anticipate little to no impact on the Port of Oakland’s cargo operations should there be an East Coast dockworker strike,” a spokesperson for the Port of Oakland told FOX Business.

Port of Long Beach CEO Mario Cordero told FOX Business in a statement that the port is “fluidly processing record volumes of cargo” and that the port is prepared to respond if necessary should workers strike ports should proceed in ports on the east coast and in the Gulf.

“We are hopeful for a timely and mutually beneficial resolution to the contract covering the Eastern and Gulf Coasts. However, should the need arise, we will depend on the close relationships we have developed with our industry and labor partners to work towards maintain the movement of the supply chain and the functioning of the American economy,” Cordero said. “We stand ready to activate our business recovery task force for the duration in the event of a disruption to the movement of goods in this region as a result. of work stoppages elsewhere.”

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The potential port strike could cost the US economy up to $5 billion per day, while a JP Morgan analysis estimated a range of $3.8 billion to $4.5 billion per day. Some would be recovered after the end of the strike and the ports would resume normal operations over time.

The 36 East and Gulf Coast ports that could be affected by the strike collectively handle half of seaborne imports to the United States, with significant quantities of agricultural products and vehicle imports, as well as imports of machinery, fabricated steel, and precision instruments in the balance. These ports are also important hubs for U.S. agricultural and pharmaceutical exports.

FOX Business’ Aislinn Murphy contributed to this report.