By SRH
“The biggest presidential election wild card nobody’s talking about? Flexport CEO Ryan Petersen wrote on X earlier this month about the coming port strike that might close all East and Gulf Coast ports 36 days before the election.
With about half the day left, Goldman analysts lead by Brooke Roach presented the “current state of the supply chain and freight environment for the retail industry.”
More than 45,000 International Longshoremen’s Association (ILA) members from over three dozen facilities in 14 Gulf and East Coast ports went on strike early Tuesday, the largest US port labor action in over 50 years. A new multi-year labor contract dispute over automation and wages has sparked a nationwide labor action that threatens supply networks. If the strike lasts longer than a week, stores may run out of specific goods (read: here), causing inflation.
The International Longshoreman Association and US Maritime Alliance contract expires on September 30. In a 9/26 note, our US transportation analyst Jordan Alliger discussed the consequences of labor disruption at East/Gulf Coast ports. While we do not predict any outcome, our team has received more investor inquiries about potential congestion disrupting US retail at a critical shipping period before the holidays.
Retail association comments: The American garment and Footwear Association estimates that 53% of US garment, footwear, and accessories imports go through East and Gulf Coast ports. The AAFA also cautioned that East Coast/Gulf port interruption could affect West Coast port operations, causing supply chain disruptions. The Retail Industry Leaders Association also noted that while businesses have activated contingency plans to prevent job disruption, it becomes difficult to mitigate the longer a work stoppage lasts.
Our assessment of impact: We polled our hardlines and softlines coverage universe to assess exposure, and most companies said: (1) A increased reliance on West Coast ports for their predominantly Asia-sourced product; (2) Proactive rerouting and other arrangements to guarantee important cargo arrives on-time for holidays; (3) Other contingency plans, including airfreight for select commodities.
Many companies were preparing for greater freight costs in 2H due to risk factors such port contract negotiations, Red Sea interruption, and higher spot product rates. The length of any work disruption and subsequent port congestion (which could affect both West and East Coast ports) would likely determine the severity of any disruption. Longer periods of congestion for shops have been linked to delayed product arrival, which can hurt holiday and seasonal full-price sales. Company exposure details are in the tables below.
Supply networks must work well to deliver things like sardines and screwdrivers.
Labor is needed throughout the supply chain. That includes the individuals who transport your canned fish and equipment to a supermarket, hardware store, or your front door.
Amazingly, ships transport 90% of worldwide trade. At the height of COVID-19, supply chain interruptions were noticeable. U.S. ports were often congested. Demand for things that were temporarily popular fluctuated. Shortages of truckers and other freight service providers disrupted land and sea transportation.
If the strike lasts at least a week, bananas, cherries, chocolate, beef, fish, and cheese might be severely impacted, as could some prescription drugs due to shipment disruptions.
If the walkout lasts a month or more, factories may lack supplies. Lots of consumer goods wouldn’t arrive. It would lay off workers. U.S. exports, especially agricultural ones, may fail to ship. Maybe inflation rises again. New economic worry, uncertainty, and massive financial losses would follow.
While West Coast ports experienced exceptionally strong demand, shipping there was also disrupted.
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