Many U.S. logistics and freight companies were anxiously waiting for today because January 15th marked the day of potentially resuming nationwide port strikes. Luckily, last week, a "win-win" agreement was reached between the parties involved, averting the strikes and putting everyone at ease for the foreseeable future. Here's what you need to know.
Port Strikes Recap
The port strike in the U.S. began on October 1, 2024, following the expiration of a contract between the port workers and the ports due to disagreements about compensation for workers and the use of automation. Dockworkers at 36 ports across the U.S. halted operations, demanding higher wages and voicing concerns over the potential loss of their jobs due to automation. After three days, The International Longshoremen's Association (ILA), representing more than 45,000 active members, managed to secure a tentative deal which increased hourly pay by 10% in the first year and 62% over six years. The agreement also paused the strike until January 15, 2025, while negotiations took place.
Although the strikes continued for only three days, it represented the first strike at East Coast and Gulf Coast ports since 1977, causing chaos and financial loss. To put it into perspective, the ports involved in the strike handle about 14% of agricultural exports shipped by sea and more than 50% of imports. As a result, the Port Authority of New York and New Jersey revealed losing between $250-300 million a day during the strike. Meanwhile, the total economic loss was estimated to have reached $1 billion in every port involved during the three-day shutdown. Additionally, U.S. port strikes negatively affected local rail and road freight industries and even spread to neighbouring Canada, where dockworkers went on strike for 10 days, causing delays just before the holiday season.
The combination of port strikes, the record holiday season, and President-elect Donald Trump's newly proposed higher tariffs on foreign goods resulted in immense pressure on the industry. According to Global Trade, October saw 2.49 million TEUs handled at U.S. ports (8.1% year-over-year increase), while in November it reached 2.36 million TEUs (12.8% year-over-year increase). U.S. ports finished the year strongly, with 2.36 million TEUs handled in December, marking the third time ever when imports for this month have surpassed 2.3 million TEUs, which also represented the second-highest volume for December in the country's history.
U.S Port Strikes Averted
A week before the January 15th deadline, The International Longshoremen’s Association (ILA) union announced reaching a final agreement with the U.S. Maritime Alliance of ports and shipping companies (USMX), averting the potential strikes that could have had a detrimental impact on the American economy. In a released statement, both parties called the new deal a "win-win" situation.
CBS News estimated that a failure to reach an agreement could have been highly damaging to the U.S. economy. More than 20,000 dockworkers going on a strike would have halted ports' activities and potentially reduced the nation's economic activity by up to $7.5 billion per week. The full details of a new agreement have not yet been disclosed, but the ILA and the USMX found a resolution regarding worker’s pay and automation. According to CNN, full automation was left out of the new six-year contract. Still, it allows semi-automation, meaning the ILA has guaranteed jobs directly associated with any new technology.
What Happens Next?
A new contract allows employees and employers in the U.S. ports to focus on the job, which is great news, knowing that the next few months should be busier than last year’s. Seafood Source predicts that U.S. ports will handle 2.2 million TEUs in January (12% year-over-year increase), 1.87 million TEUs in February (4.1% YOY decline due to Lunar New Year, when factories shut in many Asian countries), 2.17 million TEUs in March (12.7% YOY increase), and 2.15 million TEUs in April (6.6% YOY increase).
Although the projected growth is promising, it might not reflect the reality. After Donald Trump was elected as the new U.S. President in November, he proposed a 60% tariff on all imports from China and a 10% tariff on imports from other countries. As a result, many American logistics companies started front-loading stock to save money in advance, which follows the same patterns as in the past, when the market was more active in 2018 after Trump imposed tariffs that impacted ocean volumes from China and freight rates.
On January 20, Trump will officially be inaugurated as President and will be able to start executing his plans. Therefore, it is hard to tell how much of the current growth in TEUs handled is the actual growth and how much of it is front-loading activities before the new potential regulations are passed and come into effect.
While future changes in U.S. trade policies will bring unique challenges and opportunities, businesses need logistics partners who understand the nuances of supply chain management in a rapidly changing environment. KATA Global Logistics actively monitors the market situation and prides itself on offering tailored solutions that adapt to shifting needs, focusing on efficiency, cost-effectiveness, and customer satisfaction.
Contact us today to learn how we can help your logistics strategy and make the best decisions to be future-proof.
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