Potential Dockworker Strike Threatens US East and Gulf Coast Ports

An increasing likelihood of a dockworker strike next week at container terminals along the US East and Gulf coasts could disrupt approximately 1.7% of global shipping capacity if it lasts a week, tightening the supply of equipment and vessels, according to a recent report. The report highlighted that a weeklong strike would impact about 500,000 TEUs of overall capacity due to ships being anchored during a potential stoppage. This situation would resemble disruptions caused by Red Sea diversions but on a smaller scale.

A prolonged strike is expected to extend capacity tightness to early 2025, potentially keeping freight rates elevated for an extended period. With the impending deadline, East Coast ports are implementing contingency plans, while related industries, such as trucking, are also taking proactive steps to minimize the potential impact. Ocean carriers are exploring options to mitigate losses, and one carrier group has suggested it may respond by adjusting its port calls to expedite vessel departures from the US East Coast.

Although West Coast ports are the most likely alternative in the event of closures along the East and Gulf coasts, they are unlikely to absorb all the diverted volumes. The report estimates that West Coast ports could only handle around 17% to 18% of diverted cargo, based on a comparison of peak throughput during the COVID-19 pandemic and average throughput in previous years. This is a significant shortfall, as the majority of cargoes from Europe, the Caribbean, and the East Coast of South America typically enter through East and Gulf Coast ports and lack viable alternatives in case of a strike.

Canadian and Mexican ports are also unlikely to handle significant spillover capacity. Diversion concerns are further compounded by estimates that even a one-day work stoppage would take ports six to seven days to recover, while a two-week disruption would push recovery timelines into the following year. However, port directors have indicated that if a work stoppage does not exceed a few days, recovery could be achieved in a matter of weeks, citing their ability to clear cargo after previous disruptions caused by severe weather.

Despite contingency measures, there remains uncertainty over whether alternative ports will be able to handle the additional volumes. Few clients have shown interest in shifting cargo to the West Coast, likely due to concerns over these ports’ ability to manage the sudden surge in traffic. The length of the strike will be a key factor in determining its impact on freight rates, with increases likely if capacity remains constrained.

Port operators and shipping lines are pushing for a resolution before the existing agreement expires. The group representing port employers has filed a complaint with a federal labor regulator, urging it to order negotiations on a new contract covering ports from Maine to Texas. There have been no formal bargaining sessions yet, despite threats of a work stoppage without a new contract.

The dispute centers on the terms of the new agreement, which involves a substantial proposed wage increase over the next six years. The timing of a potential strike is raising concerns among retailers and manufacturers, as it coincides with the critical holiday shopping season and the run-up to a major election.

Government officials have indicated they are monitoring the situation closely but have so far refrained from direct intervention. A significant portion of US imports moves through the East and Gulf Coast ports, which handled around 60% of containerized trade last year. Many ports have extended their operating hours recently, allowing importers to clear cargo from the docks ahead of a potential shutdown set to begin early next week.