The International Longshoremen’s Association (ILA), representing approximately 45,000 dockworkers along the East and Gulf Coasts, could strike again in January 2025 posing a significant disruption to U.S. supply chains.
This past October, the ILA initiated a three-day strike after the expiration of their contract, primarily due to disputes over wages and the automation of port operations. The strike impacted 36 ports from Maine to Texas, which handle about half of the cargo entering and leaving the United States. The strike was suspended on October 3, 2024, following a tentative agreement that included a 62% wage increase over six years, elevating average union wages from $39 to approximately $63 per hour. This agreement extended the Master Contract until January 15, 2025, allowing time to negotiate unresolved issues, notably automation. Here’s a breakdown of the two major issues:
- Automation: The ILA has expressed strong opposition to automation, citing concerns over job security. Employers, represented by the United States Maritime Alliance (USMX), argue that automation is essential for maintaining competitiveness and meeting future supply chain demands. Recent negotiations have stalled over this issue, with the ILA stating, “The ILA’s resolve remains strong not to surrender any ILA jobs.”
- Wages: The tentative agreement reached in October included a significant wage increase. However, this agreement is contingent upon resolving other issues by the January deadline. The substantial wage hike reflects the union’s efforts to secure better compensation amid rising living costs and the increased profitability of port operations.
Potential Outcomes:
- Successful Negotiations: If both parties reach a comprehensive agreement addressing automation and other concerns by January 15, the strike can be avoided, ensuring the continuity of port operations.
Renewed Strikes: Failure to resolve key issues could lead to another strike, disrupting port activities and impacting the supply chain. The ILA has shown its willingness to strike over these matters, indicating the seriousness of their stance. - Government Intervention: Prolonged strikes may prompt federal intervention to mandate a return to work, especially if disruptions significantly affect the economy. The Biden administration had played a role in facilitating negotiations back in October.
Potential Impacts:
- Supply Chain: A strike will likely halt operations at major ports, leading to delays in the movement of goods. The October strike, though brief, caused backlogs that took weeks to clear, affecting industries reliant on timely imports and exports.
- Economic Consequences: Prolonged port closures can have severe economic repercussions. Estimates suggest that a one-week strike could result in losses ranging from $2.1 billion to $4.5 billion per day, considering factors like perishable goods spoilage and halted industrial production.
- Global Trade Effects: Delays at U.S. ports can ripple through international supply chains, impacting shipping schedules worldwide. Ships delayed in the U.S. may arrive late at subsequent ports, causing logistical challenges across the globe.
What Businesses Can Do:
- Inventory Management: Companies should assess their inventory levels and consider increasing stockpiles of goods to mitigate potential supply disruptions.
- Alternative Shipping Routes: Exploring alternative ports or transportation methods can help maintain the flow of goods if primary ports are affected by strikes. M.E. Dey can help you explore your options.
- Stakeholder Communication: Maintaining open lines of communication with suppliers, customers, and logistics partners will be crucial to navigating potential disruptions effectively.
Although the suspension of the October 2024 strike offered temporary relief, unresolved issues—particularly around automation—suggest a strong likelihood of renewed strikes in January 2025. To stay ahead of potential disruptions, businesses are advised to develop proactive contingency plans to safeguard their operations and supply chains. M.E. Dey will be closely monitoring developments and keeping clients informed of any changes that could impact their shipments, offering guidance and viable solutions.