US Port Strike: Impact on Supply Chain and Tentative Agreement

The Strike is Over, What's Next? Port workers, from Maine to Texas, began a strike on Tuesday morning in protest of low wages and process automation, a situation that could reignite inflation and generate product shortages if prolonged for weeks. The strike, affecting 36 ports and involving about 45,000 members of the International Longshoremen's Association (ILA), is the union's first since 1977 and has put the national supply chain in check. The contract between the ports and the union expired at midnight, and although progress was reported in negotiations on Monday, no agreement was reached, leading workers to picket at several ports, including the Port of Philadelphia. Protesters demanded protection against job automation and better wages, emphasizing the importance of their work in the United States supply chain. Boise Butler, an important union leader, stressed the relevance of securing a fair contract that prohibits automation, especially since shipping companies achieved enormous profits during the pandemic. 'Now we want them to return those profits to us. They're going to return them to us,' declared Butler, emphasizing that the role of port workers is key to keeping the supply chain functioning. What Was Achieved in the Tentative Agreement? On Thursday, the US Maritime Alliance (USMX), representing the ports, offered a 62% wage increase over six years. Workers will receive an initial $4 per hour increase, raising their base salary from $39 to $43 per hour, an immediate increase of just over 10%. During the contract term, they will receive an additional $4 per hour increase each year, resulting in a total increase of $24 per hour. This agreement, although tentative, has managed to suspend the strike, and both parties have extended the previous contract until January 15 to continue negotiating other aspects affecting the supply chain. This wage increase approaches the union's initial demand, which required a 77% increase to compensate for inflation and small increases in recent years. Although negotiations continue, the union managed to avoid setbacks in automation protections, a critical aspect for supply chain stability. Immediate Consequences of the Strike on the Supply Chain The economic impact of the strike was immediate. The Port Authority of New York and New Jersey reported daily losses between $250 and $300 million, accumulating nearly one billion in economic losses during the four days of stoppage. It was estimated that about 24 ships were anchored waiting to unload at the port, with 35,000 import containers loaded with consumer goods, generating considerable disruption in the supply chain. Although the strike has been suspended, the return to normalcy in the supply chain could take several days. The ports of New York, New Jersey, and Virginia remain closed to trucks while they relocate containers and prepare to resume goods flow. It is estimated that it will take between three to five days for each day of stoppage to normalize operations. Additionally, other ports plan to extend working hours during the weekend to catch up with the work backlog in the supply chain. Long-term Potential Impact on the Supply Chain Although the strike lasted only a few days, its long-term effect could be significant if negotiations fail and the strike resumes. Experts warn that a prolonged strike could paralyze the supply chain, generating a 'domino effect' that would affect everything from delivery of toys and Christmas products to perishable goods like bananas, which represent 75% of the national supply of this fruit. Some sectors, such as rail, tried to increase their capacity to mitigate the impact, but analysts point out that it would not be sufficient to compensate for the closure of East Coast ports. Additionally, J.P. Morgan estimated that a complete closure of East Coast and Gulf ports could cost the economy between $3.8 and $4.5 billion per day, affecting retailers, automakers, and agricultural product importers. However, part of the losses could be recovered once operations normalize and the supply chain recovers its usual flow. Uncertain Future for the Supply Chain While the tentative agreement seems to have ended the strike for now, ratification by union members is still pending. If workers vote against the agreement, the strike could resume, generating more uncertainty for the supply chain. A rejection of tentative labor agreements is not unusual, as demonstrated by the recent case of the International Association of Machinists, whose members rejected a proposed agreement with Boeing and have remained on strike since September. For now, both parties seem eager to resolve remaining differences, and negotiations are expected to continue in the coming weeks. The strike, which occurred just weeks before the presidential elections, could also become a controversial topic if tensions are prolonged and generate product shortages, severely affecting the country's supply chain.