In October 2024, the International Longshoremen Association (ILA) initiated a strike throughout the Eastern and Gulf Coast ports after negotiations surrounding a new contract stalled with the United States Maritime Alliance (USMX). This strike comes just two years after similar negotiations stalled on the West coast between the USMX and Internal Long shore and Warehouse Union (ILWU) in 2022 which led to decreased traffic and volume for about a year. Many ships were rerouted to other ports across the country during this time, removing volume from the West coast ports. It was reported that the Los Angeles Port had lost about 15% of its cargo to other ports during this time due to rerouting. The two sides reached an agreement in August of 2023 to approve a new 6-year contract expiring in July 2028 (retroactive to July 2022). The new contract gave union members a 32% pay increase over the contract term and a $70 million bonus for working in the early months of the Covid pandemic. The pay increase included a $4.62 raise the first year, followed by a $2 raise each subsequent year. Of the 22,000 West coast dockworkers, 75% voted in favor to approve the contract and “protect good paying jobs.”
Negotiations stalled for around 5 months in the lead up to October 2024 with neither side reaching an agreement on a new contract. Unlike the 2022 negotiations process, the ILA initiated a full strike, the first of its kind since 1977. The ILA is the largest union of maritime workers in North America, representing upwards of 85,000 longshoremen. It operates in areas such as the Atlantic, Gulf Coast, and the Great Lakes among others. The strike has affected 36 ports so far, stretching from Maine to Texas, as nearly 25,000 member contracts are set to expire on November 30th. The ILA and port workers want a fair contract that does not allow for increased automation of ports, reimbursement from the Covid pandemic, and a substantial pay raise before they will return to work. The ILA’s original offer stood at a pay raise of 77% over the six-year life of the potential new contract. This offer was countered with a 50% raise by the USMX and set limits over the use of automation. The USMX is responsible for the transportation and handling of cargo shipped to and from the United States along with contract bargaining, regulatory and safety issues, and training.
The USMX offer has since been rejected, but there is hope for a resolution soon. Under the strike conditions, cargo ships would continue to face increased berthing times, extended container dwelling periods, and more diversions to alternate ports. Once the strike started on Monday, 38 container vessels were backed up in U.S. ports, compared to three vessels the prior day. This exponentially increases the berthing times for cargo ships which in turn is costing companies millions from increased travel costs and spoiled goods. As container dwelling times continue to rise the supply chain will begin to slow with shipments getting delayed up to a month in some cases. Companies had begun diverting their cargo to alternate ports such as the Bahamas, Latin America, and Canada, further increasing the amount of time and expense it would take for the products to reach U.S. markets.
Nothing moves slowly in the transportation world; on October 3rd, the ILA and USMX reached an agreement to extend the current contract until January 15, 2025, providing time to negotiate a new contract and effectively ending the strike after three days. The tentative agreement currently increases ILA wages by 61.5% and includes an increase of $5 per hour each subsequent year, but both sides remain divided on the use of automation in the ports. The January 15th deadline gives a little over 100 days to resolve these divisions or another strike could be on the horizon. This time threatening to completely dismantle the U.S. supply chain going forward, increasing prices and wait time. The National Association of Manufacturers believes that another strike could cost up to $2.1 billion in trade delay and reduce GDP by as much as $5 billion per day.
Due to the short lived nature of this strike (only three days), it is believed that consumers will ultimately feel minimal disruptions on the products affected. Supply chain experts stated that it takes around four to six days to recover from each day of the strike, so it should be resolved in about 20 days. Each of those days longshoremen will be able to increase their capacity until normal levels are achieved once again. Focus now shifts to the January 15th deadline as we wait to see if the new contract is voted in favor of by the ILA delegates.
If the strike were to return in Q1 2025 multiple industries would be affected throughout the United States due to the intricacies of the supply chain. Industries with “just-in-time” inventory models, such as retail, electronics, and automotive, would suffer the most. The retail industry tends to have a short supply of perishable goods to limit their time on the shelves and give consumers the freshest options available. During the winter months fruits and vegetables are imported into the U.S. at their highest levels due to other countries’ extended growing periods and warmer climates. A renewed strike could directly affect the prices of fruits and vegetables as the supply chain slows and limits their availability. Many secondary cities in the East and Southeast of the country will be affected by another strike if it were to occur.
Among those cities Atlanta, Charlotte, Austin, and Philadelphia are most likely to feel the effects due to their close proximity to large ports and increased levels of transportation through these regions. Along with an increase in pay, the use of automation in U.S. ports is another contention point during contract negotiations. The ILA believes that automation will lead to less job security within ports, and the use of physical workers eventually being phased out by machines. Compared to some international ports that are fully automated such as the Port of Shanghai and the Port of Melbourne, the U.S. is far behind in the use of automation. While the ILA does have a valid stance, automation could create some upsides for ports as well. Decreased human interaction with large machinery would greatly improve safety for the workers as ports that have implemented some automation have seen accidents decline from two to three a month to zero in the first month of use. While some manual laborers would be phased out, it would also create new jobs that would be essential for the machinery to be used correctly. Ultimately, performance would increase from greater efficiency and productivity for each port reducing wait times and increasing the supply chain. While there are possible upsides it appears that the ILA is firm on its stance and the use of automation within the United States will remain minimal compared to their international counterparts.
The January 15th deadline between the ILA and USMX is looming ahead of us as we wait to see if the new contract will be ratified in time before another strike is launched. October allowed us to view what an extended strike could lead to, but the implications of a second could lead to higher prices and increased supply chain times. Hopefully, higher wages and minimal increase in automation will satisfy the longshoreman enough to remain at work and off the picket lines.
Mercer Capital’s Transportation & Logistics team constantly watches the transportation industry and global events and economic factors that can impact the overall industry, the supply chain, or various aspects of transportation. Mercer Capital provides business valuation and financial advisory services, and our transportation and logistics team helps trucking companies, brokerages, freight forwarders, and other supply chain operators understand the value of their business. Contact a member of the Mercer Capital transportation and logistics team today to learn more about the value of your logistics company.
Originally published in Mercer Capital's Transportation & Logistics Newsletter: Fourth Quarter 2024