Supply Chain Logjam About to Hit on October 1

The clock is ticking for union dockworkers and port owners to work out a labor contract and prevent a walkout. The union seems prepared to strike — and the effects will ripple far and wide.

The Sourcing Journal reports that just a one-day strike would cause bottlenecks for six days. And a one-week strike would cause supply chain backups from four to six weeks. The 85,000 dockworkers poised to go out on the picket line work at the East (including New York City) and Gulf Coast (Houston) ports that handle roughly 72% of seaport trade at a value of $2.12 trillion.

The International Longshoremen’s Association (ILA) is seeking a 77% pay increase, over the next six years, from the U.S. Maritime Alliance (USMX) which owns and operates the docks. Union leaders also want concessions on automation that poses a threat to dockworkers’ hours and jobs. The ILA stresses how dockworkers continued to keep the supply chain running during the entire course of the COVID-19 pandemic.

Companies recently upped shipments to West Coast ports in July and August in expectation that a strike is inevitable. Los Angeles and Long Port warehouses are reportedly stuffed to the gills with products, all in an effort by suppliers to fulfill Black Friday and Christmas time demand.

Supply Chain Headaches to Expect

Ryan Peterson, CEO and founder of Flexport, broke down the factors leading to the impending strike and the likely supply chain effects in a thread he posted on X. Long story short? Peterson is telling businesses to batten down the hatches!

Shipping prices “from Asia to the West Coast [will] spike almost immediately to levels far beyond the $20,000 peak historical norms,” says Peterson. “When capacity is tight, in a competitive market the price will go to the importers willing to pay the most — those with the best margins. Those with worse margins — furniture and other bulky, lower margin goods — will be shut out altogether.

“The result will be supply chain snarls that make what we saw during COVID look like a walk in the park,” Peterson warns. “In the worst-case scenario — a strike that lasts for more than a few weeks or even months — could create massive risks for the U.S. economy. Rerouted shipments could overwhelm West Coast ports, creating container pile-ups, chassis shortages, skyrocketing transport costs, rail congestion, and an air freight market that’s already stretched thin.”

The Biden administration announced it wouldn’t step in and order the ILA to end its strike. “We’ve never used [the] Taft-Hartley [Act] to break a strike and are not considering doing so now,” said a White House official. Any resulting inflation due to supply chain disruptions could hurt Kamala Harris‘ chances in November.