The year-end festive cheer could be under threat as a major dockworker strike looms in the US, putting the global supply chain at risk of further disruptions.
The repercussions of the industrial action, if it comes to pass, will spread beyond US shores, with Singapore businesses and consumers at risk of delays and supply shortfalls ahead of the holiday season.
With less than a week before a current agreement expires on Sept 30, contract negotiations between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) remain at an impasse.
The ILA, which represents dockworkers in the US east and Gulf coasts, has said work will cease at ports there unless a new contract with the USMX incorporating its demands for better wages and anti-automation measures for dockworkers is inked before the current six-year contract expires.
Around 45,000 workers could now go on strike from Oct 1 if their demands are not met, a move that would close all east coast and Gulf of Mexico ports, including The Port of New York and New Jersey, the second-busiest port in the country after Los Angeles, which is on the west coast.
That could cripple hundreds of billions of dollars’ worth of trade and bring logistics to a standstill just months before Christmas.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
From September 2023 to August 2024, the east and Gulf coast ports handled approximately 54 per cent of US imports, according to official data.
Vice-president for maritime and trade at S&P Global Market Intelligence Peter Tirschwell noted that port closures beyond a few days will cause significant backups of ships, trains, trucks and cargo.
“Any strike beyond a few days will take weeks for the system to fully recover, while a strike of a few weeks would take months to fully restore fluidity to the supply chain”.
Speaking on a webinar by shipping analytics firm Xeneta, Lars Jensen, chief executive of consultancy Vespucci Maritime, added that disruptions in the US will lead to shipment delays and a shortage of shipping capacity in Asia within five to seven weeks.
“Should the strike be a lengthy one lasting for a period of weeks, it will have a major impact in Asia as we begin the pre-Chinese New Year rush,” he said.
Stephen Ly, vice-president in South-east Asia at logistics firm CH Robinson, said these disruptions could benefit transshipment hubs like Singapore, pushing up demand for local warehousing and logistics services.
“Industries with complex supply chains, like automotive and consumer goods sectors, would be especially affected. Ports like Singapore, being central to Asia-Pacific trade, could see an influx of inventory buildup as such goods are delayed going into US markets,” he added.
When contacted, a spokesman for the Maritime Port Authority of Singapore said it has so far not “observed exceptional changes to vessel traffic at Singapore’s ports”, but is “closely monitoring global developments and their potential implications on shipping activities”.
While the Singapore port is unlikely to be directly affected, a strike in the US east coast will lead to higher shipping prices at a time when rates are already volatile, with liners diverting cargo around the Horn of Africa and away from the Red Sea.
“If freight costs worldwide were to go up as a result of a lengthy US east coast strike of more than two weeks, it would likely affect freight costs to and from the Singapore port,” said Tirschwell.
Jensen added: “When there’s a capacity shortage, you can raise rates higher and faster than before. Carriers have learnt this during the pandemic and applied it during the Red Sea crisis. Rest assured, if we get a strike on the East Coast, they will apply it again.”
Some of the biggest shipping lines have already started incorporating additional surcharges to their rates. In September, Swiss carrier MSC told customers it would apply emergency surcharges of US$1,000 (S$1,290) to US$1,500 per container on all shipments from Europe to the US east and Gulf coasts starting Oct 1.
Danish liner Maersk, French carrier CMA CGM and Germany’s Hapag-Lloyd have also announced additional shipping and port charges in anticipation of a strike.
Mick Aw, senior partner at consultancy Moore Stephens, said the additional fees will have an immediate impact on consumer shipping costs, although consumers and businesses in Singapore are likely to be more affected by delays and disruptions to shipping schedules.
This is because shipping rates are spread across a single shipment, so the impact will not be as great for smaller items like a pair of sneakers.
Vendors who ship in items such as food ingredients and other basic materials may also not wish to pass on the higher shipping costs to customers.
“The costs to Singapore from shipping delays and any consequent lost revenues, breaches of contract or damages incurred may impact the consumer much more than the direct costs arising from the shipping surcharges,” Aw said.
Ly added that Singaporeans might see higher prices for US-related products in Singapore and also experience limited availability of popular US brands and products.
Negotiations between the ILA and USMX actually began in February 2023, but had floundered with the two parties unable to agree on wage increases for dockworkers, who load and unload cargo from ships at ports.
But talks came to a halt in July 2024, when the ILA suspended negotiations upon learning that automated technology was being used by USMX member Maersk at its port terminals instead of union labour, in violation of the current contract.
In a Sept 17 statement, USMX said “it is disappointing that we have reached this point where the ILA is unwilling to reopen dialogue unless all of its demands are met”.
Responding to a letter from 177 trade associations urging US President Joe Biden to act if negotiations with the ILA fail to resume, a White House representative on Sept 17 said it would not intervene to ensure there are no port disruptions.
While the US Department of Labour has since reached out to the USMX, suggesting that Biden’s administration is willing to help hammer out a deal, experts are not hopeful.
Said Tirschwell: “At this point, a strike is likely to occur at midnight Sept 30, US east coast time. Both labour and management are dug in on their respective positions and there is no easy off-ramp.” THE STRAITS TIMES
