Recession fears grow as US port strike enters third day

A three-day US port strike has raised fears of a recession as panic buying and supply chain disruptions worsen.

Port of Tampa Bay dockworkers join strike

Port of Tampa Bay dockworkers join strike ( Source: Fox13)

Similar to the pandemic, panic shoppers in the US have rushed to stock up on essentials like bottled water and toilet paper as a strike at US East Coast ports enters its third day, with experts now saying the action could last weeks rather than just days.

Some 45,000 dockworkers at ports from Maine to Texas went on strike Monday night, creating the largest industrial strike at ports in the world this century, which prompted several shipping lines to declare force majeure this week.

The International Longshoremen's Association (ILA) has failed to reach a new contract with the United States Maritime Union (USMX) over demands for a wage increase of more than 70 percent and a commitment from terminal operators not to automate their facilities.

USMX said yesterday that it is willing to reopen negotiations with the ILA, but has not accepted the union's preconditions.

“It is now more likely we are looking at weeks rather than days as a duration for the conflict.”

“USMX’s goal continues to be focused on ratifying a new Master Contract that addresses all the critical issues the parties need to bargain," USMX said in a statement. “Reaching an agreement will require negotiating — and our full focus is on how to return to the table to further discuss these vital components, many of which are intertwined. We cannot agree to preconditions to return to bargaining — but we remain committed to bargaining in good faith to address the ILA’s demands and USMX’s concerns.”

On the ground, port agent Inchcape said the strike has most severely affected container and roro terminals on the US east and gulf coasts. Private terminals, particularly those handling bulk and liquid cargo, have been less affected, Inchcape noted.

With both President Joe Biden and Republican presidential nominee Donald Trump backing the ILA’s position this week, experts are increasingly confident that the strike, the first on the US east coast since 1977, will be a long one.

“My take on this is that it is now more likely we are looking at weeks rather than days as a duration for the conflict,” said Lars Jensen, a prominent container shipping expert and founder of consultancy Vespucci Maritime.

“The ripple effects we will see unfold in coming weeks will include congestion in Central American hubs, a sharp drop in export capacity out of all regions starting with Europe and South America as the planned vessels do not arrive from the US in a couple of weeks. This will lead to congestion issues in Europe and South America as local export cargo might arrive in ports destined for the US but with no vessels to pick up the cargo. This will then gradually spread to other regions as well,” Jensen predicted in a LinkedIn post.

At least 45 container ships were unable to unload and were anchored outside the ports affected by the strike on Wednesday, up from just three before the strike began on Sunday, according to Everstream Analytics. The data analytics firm warns that the backlog could double by the end of this week.

Despite the growing chaos in the supply chain, spot freight rates published by Drewry today continued to fall. The World Composite Index, a global index of spot rates, fell by about $100 per FEU to $3,489.33. Rates from Asia to the US East Coast fell by $106 to $5,922 per FEU, with Rotterdam to New York down $6 to $2,061 per FEU, while the opposite route – New York to Rotterdam – rose, albeit by just $2 to $724 per FEU.

Forecasts from Sea-Intelligence, a Danish shipping consultancy, show that each week of strikes will see more than 60 container ships begin lining up outside East Coast ports, with a third of those waiting outside New York. Each week of the strike would result in the loss of more than 400,000 TEUs of shipping capacity, or more than 1.4% of the global fleet, pushing up freight rates not just on routes to the US but potentially across all major shipping lanes, Sea-Intelligence predicts in a new report.

If the strike lasts a week, perishable cargo will begin to spoil, Sea-Intelligence warns, adding that if the strike lasts longer than a month, it would almost certainly push the US economy into recession.

Source: Phaata.com (via Splash247)

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