According to experts, the upcoming strike at ports on the East Coast and in the Gulf of Mexico could be very bad for many types of businesses.
The current agreement between the International Longshoremen’s Association and the United States Maritime Alliance is set to end on September 30. This is making people more worried that U.S. ports from Maine to Texas will soon be locked down.
According to Margaret Kidd, an associate professor of supply chain and operations at the University of Houston, having half of the country’s ports close down would have a huge effect on the economy.
Kidd used information from the non-profit study group Mitre to show that a 30-day strike at the Port of New York and New Jersey would cost the economy $640 million every day. Mitre says that going through the Port of Houston could bring in as much as $92.5 million a day in economic activity. That’s $51 million a day in exports and $41.5 million a day in imports.
Kidd said that an auto strike could have a big impact on the automobile industry, both in terms of making cars and making parts for them. He pointed out how important East Coast ports like Baltimore are to this industry. For big automakers like Ford Motor Co. F 0.94% and General Motors Co. GM 1.46%, a strike there could be felt by ports close to the Midwest hub. According to Kidd, the strike could also delay deliveries of fruit and veggies from Central and South America that need to be made quickly. This could hurt companies like Dole Plc. DOLE0.78%.
Kidd pointed out that many of the companies that work in the drayage (short-haul trucking) market are small ones, so it could also be affected. She told them, “They need to pay their rent.”
Supply-chain analytics company Everstream Analytics says that if all East and Gulf Coast ports were closed for 24 hours, it could take up to seven days to clear the pile of work. This is based on historical data on strikes and congestion at U.S. ports.
Everstream Analytics says that a strike could have an effect on more than just the auto business. It could also have an effect on the food, drug, and health care industries. The head of intelligence solutions for the company, Mirko Woitzik, said in a statement, “The pharmaceutical and healthcare sector, which relies on a time-sensitive supply chain, may see the biggest impacts and possible material shortages that could disrupt production or patient safety.”
Everstream Analytics, on the other hand, doesn’t think that a strike will hurt the retail sector the most. “General retail goods may be the only category not as affected by a short or medium-term strike action,” Woitzik said. “Many importers thought the strike would go ahead, so they moved the normal seasonal peak shipping season from September to August to stock up on supplies for holiday spending spikes.” “Most businesses have enough stock to last for three to four weeks, but they run the risk of having to cut off supplies if the strike lasts longer than that.”
In order to avoid a strike, the National Retail Federation has asked the White House to do something. Jonathan Gold, vice president of supply chain and customs policy at NRF, said in a statement, “NRF continues to urge the administration to immediately engage with the International Longshoremen’s Association and the United States Maritime Alliance to resume contract negotiations toward a new master contract for all maritime container ports along the East and Gulf coasts.”
Gold also said, “Many retailers have already taken steps to lessen the possible effects of a strike by bringing in goods earlier or moving goods to the West Coast.” The global supply chain is very complicated, and even a small problem could slow things down at a very important time for both customers and stores.
Kidd thinks that President Joe Biden might change his mind about staying out of the labor conflict. “There are just 45 days left until the election,” she said. “The president is going to take part.”
MarketWatch talked to John Lash, group vice president of product strategy at supply-chain platform e2open, who said that some businesses might even gain from strikes. “Some people always win and some people always lose in this kind of thing,” he said, naming makers as one group that might lose.
“Maybe the carriers will come out on top,” Lash told MarketWatch, pointing out that if the strike happens, there will be less traffic going into East Coast ports. “They can only hold so much,” he said.
