The International Longshoremen’s Association (ILA), a large maritime workers union in the United States, will likely go on strike in October 2024. This strike will shut down many U.S. ports and significantly disrupt U.S. and international supply chains, not least Australian importers.
In this comprehensive guide, Whale Logistics will explain the strike's background, its impacts on Australian importers and how we can help you navigate these rough waters.
Why the Strike?
The impending ILA strike on the U.S. East Coast, set to begin on October 1, is due to disputes over fair wages, benefits, and concerns about port automation. The International Longshoremen’s Association (ILA) argues that the United States Maritime Alliance (USMX) has failed to offer adequate wage increases and proper benefits, and they are demanding a ban on the automation of cranes, gates, and container movements.
Negotiations have failed so far, and the strike is set to go ahead. Despite a plea from 177 trade associations, the White House has decided not to intervene, citing the upcoming presidential election and a historical reluctance to use legal powers to break strikes.
The US East Coast port network serves as a key import and export hub, driving the American economy. The East Coast ports serviced 50.6% of the U.S' $194B worth of imports and exports in the month of August, highlighting its geographic and economic significance.
What are the impacts of the strike?
One of the most immediate impacts will be severe congestion at ports. With the strike halting operations, container throughput rates will slow down considerably, leading to backlogs. This congestion will occur at the East Coast ports but will have a major impact on the West Coast ports as they seek to service increased demand due to the strike. Lloyds List predicts that for each day of the strike, it will take 5-10 days to clear the backlog and a strike greater than 7 days could have a greater impact than the current Red Sea crisis.
The West Coast ports of Los Angeles and Long Beach are both experiencing container throughput rates close to the peak of July 2021 - if all U.S. bound cargo is rerouted through the West Coast it could see long delays experienced for cargo entering and exiting the U.S. These bottlenecks will affect container availability and will cause delays for both importers and exporters into the U.S., especially as the Christmas period approaches and demand ramps up.
These delays will affect schedule reliability, which may lead to carriers omitting ports and instigating blank sailings to maintain the schedule reliability, while keeping rates high, increasing the costs for Australian importers.
With the strike date nearing, Whale Logistics is already viewing the impacts of the strike, with vessels set to berth at U.S. East Coast ports being forced to anchor and wait out the strike - sapping tens of thousands of TEU from the global supply. If these vessels are delayed by the strike, global schedule reliability will drop, reducing available equipment for shippers, increasing costs and complicating supply chains.
Equipment shortages overall hurt global logistics, as shippers seeking to export may have availability shortages and delays, with carriers charging a premium to access the equipment. Overall this will drive up freight rates, while also having the potential to cause further delays within supply chains.
Carriers have already announced disruption surcharges starting 1 October. These additional costs will be passed down the supply chain, leading to increased shipping costs for businesses. The implementation of General Rate Increases (GRIs) and Peak Season Surcharges (PSS) could further drive up rates, especially if the strike prolongs into the Christmas period. Furthermore, carriers servicing the West Coast are now enacting Port Congestion Surcharges (PCS) to deal with the impending delays.
Carriers have already increased freight rates from Asia to the U.S. West Coast, as demand soars with the impending shut down. This is expected to continue so long as the East Coast strike is in effect and an agreement isn't reached.
With global supply already at less than demand and the global congestion being faced, Whale anticipates if the strikes continue long enough it may have negative impacts on Australian trade lanes due to carriers moving equipment and vessels to serve more traditional trade lanes within Asia and Europe.
How can Whale help?
Ocean Freight
The capacity to reroute vessels to the West Coast or alternate ports is highly constrained. Carriers are already imposing strike-related surcharges, with fees up to $800 per TEU for cargo rerouted to the West Coast, alongside potential congestion, and storage charges for delayed cargo in the coming weeks.
To mitigate these risks, Whale has a program for Less than Container Load (LCL) cargo to Australia that is centered around the Los Angeles gateway, utilising our network of agents to support a domestic rail program to the U.S. West Coast. For Full Container Load (FCL), while options are limited, we have proactively worked with clients and partners to move cargo ahead of these potential disruptions, ensuring all are well-positioned. If clients must move FCL cargo out of the U.S., we will ensure to exhaust every opportunity to deliver your cargo in a timely and efficient manner as these disruptions occur.
Air Freight
Our U.S. network of agents have strong air freight allocations on routes to Australia and are prepared if the strike extends over a longer period. Whale have already observed a significant demand for air capacity and have secure options to meet our clients’ needs in early October onward, to ensure continuity in your supply chain leading up to Australia's peak season.
Keep Your Supply Chain Moving - Contact Whale Logistics Now:
Whale Logistics understand that during such uncertain times, each shipment will need to be managed on its own merit. This is due to pricing, availability, delays and surcharges subject to change daily in the current climate, resulting in many unknowns for shippers. Whale Logistics pride ourselves on visibility and transparency for our customers. This is why Whale is committed to keeping our customers and stakeholders informed during these challenging times. Whale are committed to providing you with regular notices and updates on the situation to ensure you have greater visibility on your cargo and the current affairs of international freight.
To find out more about the current strike or to discuss freight options to mitigate these impacts contact Whale Logistics or your Key Account Manager today.