Industrial actions at US West Coast ports could trigger more disruptions to supply chain operations although the impact would ultimately depend on how widespread and prolonged these strikes turn out to be.

Judah Levine, head of research at Freightos, said the latest breakdown in ILWU - PMA negotiations, for example — which is now focussed on wage levels — resulted late last week in the shutdown of Long Beach's largest container terminal, TTI, and slowdowns at many terminals in Long Beach, LA, Oakland, Tacoma, Seattle and Hueneme. 

A Freightos statement noted that TTI remained closed through Monday afternoon, and though it was meant to reopen Monday night, closure of other terminals at Long Beach and disruptions elsewhere will reportedly continue Tuesday.

"Shipper groups are already urging the White House to intervene, but if operations do not resume soon, the impact of the actions will ultimately depend on how widespread and prolonged they prove to be," Levine said.

"Prolonged action will significantly impact truckers' ability to both pickup and drop off containers and cause delays and increased storage fees for export containers and for imports already at container yards or unloaded during a possible slowdown," he added.

"They would also cause delays and congestion in the form of ships waiting to dock — which will tie up capacity and put upward pressure on freight rates — and a possible buildup of containers in container yards, which could, in turn, slow the speed at which ships will be unloaded and also impact trucking."

Freightos' head of research noted that so far, there is no build-up of waiting ships, and transpacific ocean rates were stable last week, though daily prices so far this week are showing signs of increase, with the latest rates to the West Coast climbing 9% to US$1,441/FEU and East Coast rates increasing 4% to US$2,452/FEU.

Levine pointed out that these increases could be responses to the slowdowns and the impact carriers expect potential delays to have on effective capacity levels.

He added that East Coast increases may also reflect low-water surcharges for containers using the Panama Canal.

"The larger the backlog, the longer it will take to clear and restore normal levels of operations," the Freightos head of research further said.

Last major ILWU industrial action

Freightos, in the statement, noted that the last major industrial actions by the ILWU were taken in early 2015 after negotiations for a new agreement stalled.

Levine said after two weeks of terminal shutdowns and disruptions at the ports of LA/Long Beach in early January, there were 15 ships waiting for a berth, reaching a peak of 30 ships six weeks later.

He added that once disruptions eased, it took a month and a half for that number to drop to zero but reportedly took another six months until operations had completely returned to normal.

The last time there were 30 ships waiting in San Pedro Bay was in April of 2022.

"That number was down from the pandemic-driven record of more than 100 at the start of the year, and — working down many previous month's worth of backlog — it took four more months to get to zero," Levine said.

He added that with a backlog of 30 ships in April of 2022, Freightos Baltic Index Asia — US West Coast rates were at about US$6,000/FEU, about 4X the norm.

Disruptions may not be as extreme

"But the fallout may be not as extreme from previous impacts for a few reasons," Levine further said.

The Freightos head of research said back in 2015, the Panama Canal, as well as East Coast and Gulf ports, was not yet equipped to function as alternatives for the larger container vessels.

"In response to the severe West Coast congestion and threat of labour disruptions in early 2022, shippers were able to shift volumes over to the East Coast and Gulf port alternatives, though eventually, the extent of this move caused record congestion and higher prices to those lanes instead," Levine said.

"This time, however, with East Coast and Gulf ports operating normally and overall volumes down significantly from 2022 levels, some volumes could successfully be diverted to those ports, though — as 2022 showed — a significant enough disruption would likely cause some congestion and higher rates at the alternatives and still leave some backlog at the West Coast ports that normally handle about 40% of the nation’s containers."

Levine noted that low water levels in the Panama Canal could also limit the volumes that can be diverted and is already putting pressure on rates to the East Coast.

FBX Asia - US East Coast rates have already increased 4% or about US$150/FEU so far in June as carriers add surcharges for containers travelling via the canal.