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Shippers Seek Alternatives Amid Looming US Port Strike Threat, Reports Reuters

By Lisa Baertlein and Timothy Aeppel

LOS ANGELES/NEW YORK – U.S. companies that depend on East and Gulf Coast seaports are taking proactive measures as they face a potential strike set to begin on October 1. Many are resorting to early imports, rerouting goods to the West Coast, and even utilizing expensive air freight services to circumvent possible disruptions that could strain supply chains and reignite inflation ahead of the upcoming presidential election.

Kenneth Sanchez, CEO of Chesapeake Specialty Products, expressed his frustration: "This is just another headache after everything else we’ve been dealing with." Sanchez’s primary shipping hub is in Baltimore, which is part of an expiring contract between the International Longshoremen’s Association (ILA) union and the United States Maritime Alliance. Negotiations have stalled over pay issues, raising the threat of a walkout.

The timing of a potential strike is particularly concerning, as it coincides with the presidential election between Democratic Vice President Kamala Harris and Republican former President Donald Trump, where economic factors are expected to play a crucial role in voters’ decisions.

A prolonged strike, compounded by an ongoing strike involving 30,000 machinists at Boeing, could negatively impact the U.S. job market at a vital juncture. Economists have projected that if these labor actions extend into mid-October, payroll growth could decrease by up to 100,000 jobs.

For Sanchez, this situation marks a second significant supply chain challenge after a bridge collapse had already disrupted access to the Baltimore port for several months earlier this year. With the possibility of an extended ILA strike looming, he is devising a strategy to ship products via train to West Coast ports.

Meanwhile, German chain saw manufacturer STIHL is also formulating contingency plans to ensure a steady flow of exports from its facility near the Port of Virginia. The U.S. plant dispatches products to over 80 countries.

Retailers and manufacturers are working swiftly to import apparel, home goods, and machinery to avoid the fallout from a strike. This urgency has resulted in substantially increased U.S. imports over the past months, further driving up shipping costs due to vessel rerouting necessary to evade risks around the Suez Canal.

Ronnie Robinson, chief supply chain officer at Designer Brands, has altered their logistics strategy by shifting approximately half of their shoe imports from the East Coast to the West Coast. He noted that the company even paid ten times the typical ocean freight rate to airlift a shipment of leather shoes from Brazil, stating, "People are paying whatever they can to make sure they’re in the front of the queue." However, he expressed concern about the 10,000 to 20,000 units still being shipped to the East coast.

As of now, 42 container ships are scheduled to arrive at the Port of New York and New Jersey, crucial in the labor dispute, with 13 ships expected after the September 30 deadline.

In August, the largest East and Gulf Coast ports processed nearly 24,766 containers valued at $2.7 billion daily. Many products, including wine and auto parts from Europe, face the risk of delays and complex rerouting. Shipping these items to the West Coast presents difficulty due to potential challenges like navigating the Panama Canal or opting for time-intensive air freight.

Additionally, ports on these coasts manage about 75% of the bananas imported into the U.S., a low-value product that does not justify the costs of rerouting or air transportation.

The shipping cost for a 40-foot container from Shanghai to New York surged to around $10,000 in July. Although rates have stabilized, a strike could trigger another spike, further impacting consumers. Sanchez summarized the situation’s implications succinctly: "If the cost of shipping goes up … it gets pushed onto the end consumer – whether that’s someone buying a car or someone buying a metal part in a hardware store."

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