US port strike ends, leaving cargo backlog
The strike ended sooner than investors had expected, weakening shipping stocks as freight rates were no longer expected to surge
US East Coast and Gulf Coast ports were reopened on Friday after dockworkers and port operators reached a wage deal to settle the industry's biggest work stoppage in nearly half a century, but clearing the cargo backlog will take time.
The strike ended sooner than investors had expected, weakening shipping stocks as freight rates were no longer expected to surge.
"The port strike ended fairly quickly, removing any significant downside risk to the economy this quarter," said Ryan Sweet, chief US economist at Oxford Economics.
Keep updated, follow The Business Standard's Google news channel
At least 54 container ships had lined up outside the ports as the strike prevented unloading, according to Everstream Analytics, threatening shortages of anything from bananas to auto parts. More ships are sure to arrive.
Pricing platform Xeneta said it was likely to take two to three weeks for the normal flow of goods to be reestablished.
"Remember that ships keep calling, so it's not just a matter of handling the ships already in line, but to work extra hard to run down the congestion before supply chains are rerunning," Xeneta Chief Analyst Peter Sand told Reuters.
The International Longshoremen's Association workers union and United States Maritime Alliance (USMX) port operators announced the deal late on Thursday. Sources said they had agreed a wage hike of around 62% over six years, raising average wages to about $63 an hour from $39 an hour.
The ILA launched the strike by 45,000 port workers, their first major work stoppage since 1977, on Tuesday, affecting 36 ports from Maine to Texas. JP Morgan analysts estimated the strike would cost the US economy around $5 billion per day.
The disruption was a headache for Democratic President Joe Biden's administration ahead of the Nov. 5 presidential election pitting Democratic Vice President Kamala Harris against Republican former President Donald Trump. It threatened to dent US employment figures in a report due to be released shortly before Election Day.
The White House had put pressure on the USMX employer group to sweeten its contract offer to end the strike, as business trade groups warned of devastating consequences if the stoppage continued.
Shares in shipping companies in Asia and Europe fell after the deal was announced.
Shipping group AP Moeller-Maersk for example fell 4.7% by Friday morning, while Hapag-Lloyd was down 14.4%. Japan's Nippon Yusen, which had hit a record high a day earlier, shed 9.4% and Kawasaki Kisen fell 9.7%.
"Shipping stocks had previously rallied on expectations of price increases triggered by the strike by US dockworkers and the tense situation in the Middle East," said Taishin Securities Investment Advisory analyst Tony Huang.
Retailers account for about half of all container shipping volume, with Walmart, IKEA, and Home Depot among those that rely on the East Coast and Gulf Coast ports, according to eMarketer analyst Sky Canaves.
Bill of lading figures from Import Yeti, a data firm, show the importers reliant on the affected ports include IKEA, Walmart and Goodyear Tire & Rubber.
Many retailers said they had stocked early for the coming holiday shopping season, and that a short strike would likely not have much impact on availability of products.
East Coast ports are also destinations for coffee, whose price has risen because of the disruptions.
The tentative deal on wages has ended the strike, but only extends the current contract to Jan. 15. The two sides will continue to talk about other issues, such as the ports' use of automation that workers say will lead to job losses.
"The decision to end the current strike and allow the East and Gulf coast ports to reopen is good news for the nation's economy," the National Retail Federation said in a statement. "The sooner they reach a (final) deal, the better for all American families."
