- The port workers’ strike has an immediate effect on the flow of goods through Eastern US ports.
- Vessel tracking data shows an increasing number of vessels sitting at anchor near closed facilities.
- Experts tell BI that the impact of the backlog will reverberate long after a deal is reached.
For the first time in nearly 50 years, international maritime trade has stalled in the eastern US.
As the International Longshoreman’s Association strike enters its third day, the ban is already having an immediate effect on the flow of goods through East Coast and Gulf ports.
At least 38 container ships were grounded at US ports on Tuesday, the first day of the strike, up from three the previous Sunday, Reuters reported, citing Everstream Analytics data.
A Business Insider review of ship tracking data shows an increasing number of cargo ships and tankers docked near closed facilities, including in New York, Virginia Beach, Savannah, Miami, New Orleans and Houston.
Cargo ships (green dots) and tankers (red dots) docked outside US Eastern ports. MarineTraffic.com
Each of those ships represents a company that’s losing money, according to Pace University professor Andrew Coggins.
“The whole business model of the container shipping industry is to spend as little time in port as possible,” he told Business Insider.
“The ship makes money when it sails from A to B,” he added, saying that some ships are likely to adjust their speed to delay their arrival as long as possible so as not to they sit cross-legged on the anchor.
But even if the strike were to end tomorrow – which is highly unlikely – a new problem emerges: dock space.
Cargo ships (green dots) and tankers (red dots) along the mid-Atlantic. MarineTraffic.com
Ports only have a limited amount of square footage on which to stack and store containers, and once that capacity is full, things start to unravel quickly.
A working port is an intricate dance of trucks, cranes and ships, all coordinating to exchange outbound containers with inbound ones.
Stopping that flow for even a single day creates all kinds of headaches, from spoiled produce to canceled trips, Coggins said.
Cargo ships (green dots) and tankers (red dots) along the Gulf Coast. MarineTraffic.com
Burt Flickinger, managing director at retail consulting firm Strategic Resource Group, said only about 8-12 ships are typically in a port’s queue at any one time, and they usually turn around within hours.
He also estimates that only about 15% of Eastern US cargo volumes can be diverted to Western ports, although union workers there still wouldn’t admit it during the strike.
“If [the strike] goes into the next week, each week that passes will lead to half a month to a month of shipment processing, and each day’s delay can result in price increases of 1% to 2%, depending on the category, ” he said.
Cargo ships (green dots) and tankers (red dots) off Savannah, Georgia, and Charleston, South Carolina. MarineTraffic.com
Interestingly, some of the supply chain effects of the strike had been visible for weeks before Tuesday’s port shutdown, said Brandon Daniels, CEO of AI supply chain company Exiger.
Imports of medicine and other critical materials have also been redirected to air transport, raising tariffs for that mode, Daniels added.
As alternate channels reach their capacity limits, he said, “Your overall cost will go up, but the efficiency of the system then drops significantly.”
Cargo ships (green dots) and tankers (red dots) off Norfolk, Virginia. MarineTraffic.com
The White House has given no indication so far that it would use the Taft-Hartly Act to force the ILA and the US Navy Alliance to the negotiating table in the interest of national health or security.
But the damage from Hurricane Helene, the ongoing Atlantic hurricane season and the disruption of critical supplies leave little room for error.
“I would argue that we’re already there,” Daniels said.