MSC Mediterranean Shipping Company has urged customers to move US cargo through East and Gulf Coast ports before the planned start on Tuesday October 1st of a strike in 36 US Atlantic and Gulf of Mexico ports that threatens to bring to a halt up to half of US seaborne trade volumes.
Russell Group’s ALPS Marine analysis has estimated that a two-week strike could see an economic impact of $17bn in New York and $12bn in Houston, with the total impact in all ports reaching $63bn – the equivalent of a major hurricane hitting a metropolitan area at landfall.
Russell said that the commodities most vulnerable to disruption were Crude Oil ($2.2bn), Integrated Circuit Boards ($733m), Cars & People Carriers ($1.98bn) and Pharmaceuticals ($1.518bn).
Russell Group managing director Suki Basi said that “with the looming spectre of a strike at ports hanging over the US economy, our analysis reflects the wider economic damage, if it goes ahead in October. While these figures are just for a two-week strike, they show the current connectedness of supply chains to any form of disruption and resulting impact on global trade, given the role that US ports play in facilitating shipments in and out of the US.
MSC said in a customer alert on Thursday September 26th that talks between the longshoremen’s union and port employers “may not be resolved” by the September 30th deadline, resulting in closures at terminals starting October 1st. That would delay the shipping of containers – both imports and exports – on trucks and railroads through ports from Boston to Houston.
“Booking adjustments including rolls to other vessels or cancellations may be needed,” MSC said in its advisory, while noting that it would continue to accept requests for dry cargo services, while reserving the right to “not accept new refrigerated bookings.”
Hamburg- Germany-based Hapag-Lloyd said that bulk and breakbulk cargo could also be affected. It cautioned that industrial action would raise freight rates. “Shipping costs, including freight, warehousing, and drayage rates, are expected to rise due to increased demand for alternative routes and port services. Emergency surcharges may also be applied to account for additional handling and congestion”.
As freight brokerages have warned, it would not just be a matter of paying more money to shift to alternative routes. The stoppage would be so widespread that the contingency back-ups would be overwhelmed in very short order. West Coast ports are already operating at capacity.
Oxford Economics estimated that a strike would cost the US economy $4.5bn to $7.5bn a week, although this hit to gross domestic product would unwind after the strike ended and shipments resumed. It warned however that every week cargo remained stalled would take a month to clear.
Grace Zwemmer at Oxford Economics wrote in a research note on Thursday that “the strike has the potential to weigh on the October employment report at a time when the Federal Reserve is highly attuned to signs of weakness in the labour market”.
The outlook for any talks to restart over the weekend was poor. No negotiations were scheduled.