Unionized East and Gulf Coast port workers walked off the job at midnight Oct. 1, launching a strike that by one estimate will cost the United States’ economy $540 million a day and disrupt the supply chains of a spectrum of industries, including food, pharmaceuticals, apparel, automotive and promotional products.
The immediate word from promo suppliers is that a relatively short-lived strike – one lasting less than a week or two – will not have a noticeable impact on industry inventory levels or trigger the need to raise pricing on products they sell to distributors.
Like their counterparts in retail, savvy promo sourcing leaders have been preparing for the strike for months, importing more heavily farther in advance than normal to beef up stock to robust levels – an effort made to bulwark against impacts from a work stoppage at the ports.
However, should the massive port shutdown drag on, it could cause delays in getting products made overseas landed and stocked stateside, while sending importing/shipping costs soaring. Such ills, if protracted enough, could lead to stock gaps in promo and higher pricing on products.
“Anything less than two weeks should not cause a pricing change, but if it continues longer, then we’ll have a bigger issue on our hands,” said Jing Rong, vice president of supply chain and sustainability at Counselor Top 40 supplier HPG (asi/61966).
Rong continued: “The container/vessel shortage we had during COVID-19 will return, causing limited space on cargo ships. Freight rates will spike. There could be lower inventory ahead of the holiday shopping season, congestion at West Coast ports and an increase in air freight cost.”
The assessment of the strike’s potential impacts by Rong and other promo sourcing leaders is in line with what analysts are saying about supply lines across industries.
“A disruption of a week or two will create some backlogs but the broader consequences will be minimal outside of a handful of very port-reliant areas, including Savannah,” Adam Kamins, an economist at Moody’s Analytics, told CNBC. “But anything longer will lead to shortages and upward price pressures.”
Rong, like other supplier leaders ASI Media spoke with, noted HPG has ramped up inventory and continues to execute plans to stay well-stocked. “We are actively monitoring our actual inventory level and will air-freight if needed,” she said.
The Strike
Approximately 50,000 of the International Longshoreman Association’s 85,000 members went on strike on Oct. 1 after ILA leadership failed to agree to a new contract with the U.S. Maritime Alliance (USMX) – a port management organization whose members include Maersk, APM Terminals and MSC – by the Sept. 30 deadline.
The stoppage reportedly affects 14 ports from New England to Texas, including Boston, New York/New Jersey, Philadelphia, Wilmington, North Carolina, Baltimore, Norfolk, Charleston, Savannah, Jacksonville, Tampa, Miami, New Orleans, Mobile and Houston.
Talks between USMX and the ILA broke down over the summer over issues that included wages and automation at ports, which the union opposes. The sides have not been at the bargaining table since.
According to various reports, USMX on Monday offered to increase workers’ wages by nearly 50% over six years, triple employer contributions to employee retirement plans, improve health care options and keep existing contract wording that restricts automation at ports.
The ILA rejected the offer, with The Wall Street Journal reporting that the union is asking for a 77% wage hike over the life of the contract. The report said the ILA considered such an offer necessary to even begin talks again. As of this writing early Tuesday, Oct. 1, formal negotiations had not resumed.
“The ocean carriers represented by USMX want to enjoy rich billion-dollar profits that they are making in 2024, while they offer ILA longshore workers an unacceptable wage package that we reject,” the ILA said in a statement.
The Conference Board, a nonprofit think tank and research organization, asserted that the work stoppage will cost the U.S. economy $540 million per day, or $3.78 billion per week.
Under the Taft-Hartley Act of 1947, President Joe Biden has the power to suspend the strike for an 80-day “cooling off period” if the nation’s health or safety is at risk. Biden has said he will not invoke the act, though his administration has of late reportedly tried to get the ILA and USMX negotiating again.
The buildup of cargo containers from a two-week-long strike – 14 days – would take nearly three months – 84 days – to resolve, according to Denmark-based Sea-Intelligence, which studies the ocean liner industry.
“The clock is ticking away,” said Steve Lamar, CEO of the American Apparel and Footwear Association, noting 53% – more than $92 billion in value – of all U.S. apparel, footwear and accessories imports in 2023 came through East and Gulf Coast ports.
Lamar continued: “Both sides need to get back to the table and the administration must be ready to use all of its tools to make sure this happens. Reaching a fair, long-term and sustainable deal is job No. 1 for all parties.”
Promo’s Supply Lines
The vast majority of products sold in the North American promotional products industry are manufactured overseas and brought to domestic shores on ships. As such, promo sourcing leaders are closely following developments in the strike situation and said they will continue to adapt accordingly.
“The question is, ‘How long will the work stoppage be?’” said John Janson, vice president of global logistics at Counselor Top 40 supplier SanMar (asi/84863). “Knowing the potentiality of the strike, we’ve taken as many precautionary steps as possible to ensure the least impact to our customers. Months ago, we diverted some cargo to the West Coast from the East Coast. And over the last several days, we’ve worked with our logistics partners and the ports to clear the docks of any cargo that is available to be picked up.”
Counselor Top 40 supplier PCNA (asi/66887) has also been proactive.
“In anticipation of this strike, we already rerouted some priority shipments to the West Coast,” Liz Haesler, global chief merchandising officer at PCNA, told ASI Media. “However, transporting goods back to the East Coast through that route can be time-consuming and expensive. We will continue to monitor the progress.”
Like SanMar and PCNA, importers in promo and other industries have diverted at least some of their cargo traffic away from East and Gulf Coast ports to West Coast ports. That’s caused a surge in cargo container traffic at Pacific entry points.
If the East/Gulf Coast strike stretches on, the continued large scale shifting of containers to the West could become a problem, leading to backlogs that keep products trapped offshore on ships or stacked on docks, especially if unionized West Coast workers decide to show solidarity with their eastern counterparts by intentionally slowing down operations or worse.
“A consequence that may happen is that West Coast ports may choose not to handle diverted containers once the strike starts in order to show their support,” said Yuhling Lu, co-owner of Counselor Top 40 supplier Ariel Premium Supply (asi/36730).
Added Janson: “If the strike extends into weeks, the impact will be felt on the West Coast and throughout the supply chain as the balance of equipment becomes stressed as the flow of goods from the east to the west will slow down.”
Still, promo suppliers emphasized that their inventory positions are currently strong thanks to strike preparation and that they believe a short-term work stoppage will not deeply bruise the industry’s supply lines or stock levels.
“Our proactive measures have positioned us well to navigate potential disruptions and we will continue providing excellent service to our customers in Q4,” said Tim Behling, vice president of supply chain at Counselor Top 40 supplier Gemline (asi/56070). “We continue to work with our logistics partners to manage the inbound freight into alternate locations and utilize other ports as we dispatch new shipments from our partners. We do not expect any immediate impacts to our supply chain.”
Brian Porter, chief revenue officer at Counselor Top 40 supplier Starline (asi/89320), offered a similar positive view. He noted that the firm imports through British Columbia and rails product down to the U.S. One potential chokepoint was with brand partners that import through East/Gulf Coast locations. However, Starline has gotten ahead of potential strike-caused issues there, Porter said.
“We’ve been working with our brand partners, as the strike became a possibility, to build up inventory to alleviate some of the pressures,” Porter told ASI Media. “At this point, we don’t see any anticipated price increases.”
