U.S. East and Gulf Coast Port Strike Potential

The likelihood of a coordinated labor action at U.S.  East and Gulf Coast ports remains high as negotiations between the International Longshoremen Association (ILA) and the United States Maritime Alliance (USMX) broke down in June. The ILA represents approximately 85,000 port workers while the USMX represents the major port authorities located across the two coasts. Port disruptions in the form of a full-scale strike action or work-to-rule orders will commence if an agreement is not reached by the September 30 deadline. Alongside wage increases, demands for limitations on automation at U.S. ports remain the most contested issue for dockworkers. The ILA claims that the USMX is in violation of the automation clause of the current agreement at the Port of Mobile with automatic gates installed at the APM Terminal. Given the precedent set by the prolonged labor action at U.S. West Coast ports in 2023, a coordinated strike of this scale could decrease port efficiency, increase congestion, and divert vessels in large volumes to other ports that lack the absorption capacity.

Concurrent labor strikes risk increasing already-elevated maritime spot rates

Disruptions to global maritime shipping stemming from the Red Sea crisis and prolonged drought in the Panama Canal are widespread. Lengthy vessel diversions have made ocean carrier scheduling costly and unreliable, consequentially leading to vessel bunching and increased wait times at ports of call around the world, particularly in the Mediterranean and across the Asia Pacific region. For Asian exporters looking to reach markets throughout North America, the most common diversion has involved intermodal transit through West Coast ports in the U.S. and Canada. This diversion could soon be disrupted by a threatened strike action by British Columbia port workers that could render ports like Vancouver, the fourth largest in North America by annual tons of cargo processed, partially or fully inoperable. Though the Canada Industrial Relations Board (CIRB) ruled the strike invalid on July 7 and demanded the union to rescind its strike notice, elevated tensions risk future disruption if demands go unaddressed. The CIRB is also yet to rule on a potential rail strike that could take place simultaneously at Canadian National (CN) and Canadian Pacific Kansas City (CPKC).

If a new labor agreement cannot be reached, this strike would likely impact rail freight movement across Canada, particularly disrupting the movement of products such as wheat, grains, potash, and coal. Intermodal freight transport from Asia to Canadian West Coast ports, much of which is bound for Canadian and U.S. markets in the Midwest and East, could also be affected, exacerbating the disruptions of cargo movement in the event of a concurrent port strike at U.S. East and Gulf Coast ports. The combined effects of the weather, geopolitical, and labor risks to global shipping have constrained freight capacity and prompted increases in container spot rates not seen since September 2022. As of July 2024, a 40-foot container costs $5,868 (€5,425) on average across all trade routes. Any labor action in British Columbia or across U.S. East and Gulf Coast ports is likely to further elevate these rates and tighten capacity coinciding with the start of peak shipping season due to back to school and later, winter holidays.

U.S. ports so far avoid considerable congestion despite threats

Despite the significant disruptions to global maritime shipping and the looming threat of port strikes, congestion at U.S. ports has not yet seen an uptick. Combined congestion metrics for U.S. West Coast ports remain positive even as volumes have recovered in the aftermath of the port negotiations last year. Average wait times at the Port of Los Angeles-Long Beach, the Port of Seattle, and the Port of Vancouver are all below 1.5 days. Average vessel counts at the Port of Los Angeles-Long Beach was 17 for the week of July 1-7 while vessel counts at the Port of Seattle and the Port of Vancouver were 2 and 15, respectively. All congestion metrics were lower than those recorded in the previous quarter.

Combined average vessel counts and wait times for U.S. Gulf Coast ports have also not shown any signs of increased congestion. The Port of Houston is reporting average wait times of less than one day and average vessel counts of 14, both numbers are below the previous three-month average for the port. The Port of Mobile is experiencing average wait times of less than 1 day and average vessel counts of 2. Both marks are below the previous three-month average.

While the combined U.S. East Coast port congestion metrics show the highest increase compared to the previous quarter of any coast, overall congestion is still low at all ports. Average wait times and vessel counts at the Port of New York-New Jersey are less than 1 day, and the average vessel count is 3. The Port of Savannah is reporting average wait times of less than one day and average vessel counts of 7. These marks are both below the three-month trend for the port.