Get Ready: US Port Strike May Snarl Tech Supply Chains

Updated Dockworkers at American ports from Maine to Texas have gone on strike, and experts are warning it won't be long before the tech sector feels a supply chain pinch that could easily stretch into the beginning of next year. 

The International Longshoremen's Association (ILA) went on strike at midnight on October 1, leading to tens of thousands of people responsible for loading and unloading cargo at US ports on the east and gulf coasts walking off the job.

The union has demanded a $5 an hour increase in wages for each year of the planned six-year contract between it and the United States Maritime Alliance (USMX), which represents ports and shipping companies on these coasts.

"We [also] want absolute airtight language that there will be no automation or semi-automation, and we are demanding all Container Royalty monies go to the ILA," asserted union president Harold Daggett.

Container royalties were established in the 1960s to account for companies consolidating international shipments into large shipping containers, reducing the number of items that have to be unloaded from a ship. The ILS has claimed that employers have been dipping into container royalties, when all funds are supposed to be distributed to members. 

USMX claimed that it offered the ILA a "nearly 50 percent wage increase" the night before the strike began, but the union rejected it. 

"They might claim a significant increase, but they conveniently omit that many of our members are operating multi-million-dollar container-handling equipment for a mere $20 an hour," the ILA retorted.

"USMX's claim that they are ready to bargain rings hollow when they waited until the eve of a potential strike to present this offer," the union added, noting that prior to the strike-eve offer the ILA hadn't had an offer from USMX since February 2023. "Our members feel underappreciated – especially given the sacrifices they made during the pandemic, keeping ports open and the economy moving."

The ILA contract [PDF] that expired on September 30 indicated that longshoremen represented by the union started at $20 an hour, with wages topping out at $39/hour after six years of employment. Multiple news sources have reported that, with regular overtime, some ILA members can make over $200,000 per year. 

High-tech supply chain pain

It sometimes feels like we're still recovering from coronavirus supply chain interruptions, but here we are – facing another potentially months-long interruption of imports of tech products and materials. 

While many of the US tech imports come through west coast ports, Garnter logistics senior research director Brian Whitlock warned that the knock-on effects of an east and gulf coast strike will likely reach the west coast sooner rather than later – and they'll probably hang around. 

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"Looking back to 2002 when the last US west coast strike occurred, it took a full six months to recover from an 11 day strike," Whitlock told The Register in an emailed statement. "A strike that drags on for two weeks or more will have a devastating effect on supply chains that will drag on for months – well into 1Q25."

Ships will likely be rerouted to the west coast, taking weeks to arrive. The delays will ripple across global shipping, as containers stuck on ships won't return to ports, leaving origin locations unable to send out new goods.

US ports on the west coast don't have much in the way of space either, Whitlock noted. They're already operating at between 60 and 71 percent capacity, meaning many of the ships redirected from the east and gulf coasts will be stuck waiting for an open port as goods languish and perishables expire. 

Spot market pricing will quickly escalate as capacity becomes stranded or delayed in transit

"Waiting time of ships waiting to berth at the west coast will increase substantially from days to weeks [and] overall capacity will begin to shrink causing disruptions across global trades," Whitlock told us. "Spot market pricing will quickly escalate as capacity becomes stranded or delayed in transit." 

Whitlock also noted that ships rerouted to the west coast of the US could be further delayed by any solidarity actions taken by the International Longshore and Warehouse Union (ILWU), which represents longshoremen on the US west coast. We've reached out to the ILWU to learn if it's planning any work slowdowns or other actions, but haven't heard back. 

We've also contacted the ILA and USMX to learn about the status of negotiations. The latter told us it understands the need to bargain with the ILA, and that it wishes to return to the table, given one precondition: No preconditions.

"We remain committed to bargaining in good faith to address the ILA’s demands and USMX’s concerns," the alliance said, adding: "We cannot agree to preconditions to return to bargaining."

But what about air travel? Couldn't businesses put products on planes to avoid sea lane backups? Maybe for a while, said Forrester senior semiconductor Alvin Nguyen, but there's another tradeoff to be made when it comes to air dropping chip parts: It's expensive.

"[Shipping by air] will not solve the problem of the strike," Nguyen pointed out, "so expect delays for products that cannot be shipped by air and higher costs for products that can be." 

In other words, the tech world is right back in a rocky spot where supply chains are ripe for disruption and prices are potentially volatile, giving us a chance to see in real time whether the industry learned anything from the pandemic. 

In the meantime, we're left hoping the ILA and USMX strike a deal before the tech sector feels the crunch – again. ®

Updated to add at 0030 UTC, October 4

Crunch averted, perhaps. On Thursday, the strike ended with a tentative agreement on wages and a temporary contract extension through January 15 to give both sides time to reach a final decision. Details of the decision weren't immediately available.

"Effective immediately, all current job actions will cease, and all work covered by the Master Contract will resume," the ILA and USMX said in a joint statement.