East Coast Port Strike Ends as Dockworkers and Ports Make Progress

Just a few days after dockworkers at East Coast and Gulf Coast ports started a strike as October began, they are back on the job this morning. While no new long-term contract is in place, the International Longshoreman's Association union and the U.S. Maritime Alliance (USMX - representing the ports) released a joint announcement yesterday saying they "have reached a tentative agreement on wages and have agreed to extend the Master Contract until January 15, 2025 to return to the bargaining table to negotiate all other outstanding issues." In other words, while the two sides seemed quite far apart - and had reportedly not negotiated in person since early June - they were able to find enough common ground to reopen operations, sending 50,000 union employees (and several major U.S. ports) back to work.

Now that the port strike is over, what's next?

The tentative agreement on wages will reportedly see pay for ILA dockworkers rise 61.5% over six years of a new contract. That new contract still has a potentially major hurdle to clear, though, before any agreement is reached: automation. Remember how the two sides hadn't negotiated in person since June? Automation was the reason cited by the ILA for walking away. 

The union canceled a scheduled negotiating session when it said it discovered the use of an auto gate system at the Port of Mobile to process trucks - something it said violated even its current agreement (the USMX disagreed). The move highlighted the union's concern that increased use of automation could eliminate many member jobs. The USMX wants to maintain language in the current agreement that bar fully automated terminals - and have shown willingness to add a ban on semi-automated equipment.

However, the ILA has indicated it wants a complete ban on automation of gates, cranes and any container movement involving the loading or unloading of cargo. The fact that there is no new long-term agreement as of yet suggests the sides remain at least somewhat apart on the automation issue.

How does the port agreement affect the supply chain?

Supply chains had prepared for the strike possibility for some time, moving inventory for the holidays earlier than usual and already shifting cargo to the West Coast. But there were plenty of implications that were already rearing their heads:

• Those ships that were not rerouted were waiting off the coast for operations to resume
• Those containers that were rerouted would either sit at unplanned ports or need new solutions to make it to their final destination
• Exports to Europe were essentially on pause for many, as East Coast ports account for a strong majority of U.S. export activity
• While shortages hadn't begun, a longer strike would've potentially impacted a number of goods from bananas and other fruits to cars - plus raw materials used by U.S. manufacturers
• Those companies practicing just-in-time inventory management faced the likelihood of running out of product as the holiday season approached
• Shipping costs had already begun rising
• Rising consumer prices - and thus inflation - were a possible consequence, with groceries looking to be among the first
• Some estimates had a strike costing the economy as much as $5 billion a day

Again, while there were the beginnings of impacts - the brief nature of the strike suggests supply chains can return to relative normal - provided those in the industry are confident in a long-term agreement being reached in the next few months.

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