US Port Strike Could Begin Tuesday; Highly Exposed Retailers Identified

Contract Expiration and Possible Strike

The International Longshoremen's Association (ILA) and the US Maritime Alliance (USMX) are racing against time to form a new labor contract before the existing one expires at midnight. If no agreement is reached, thousands of longshoremen at three dozen facilities across 14 Gulf and East Coast ports could begin striking at 12:01 am EST on Tuesday. This situation could trigger a significant supply chain disruption and inflation surge. A Goldman analyst last week warned that a strike by ILA members could put $5 billion in daily international trade at risk at the Gulf and East Coast ports. Jordan Alliger, a Goldman analyst, cautioned clients about the potential for supply chains to become less fluid due to emergent congestion, which could result in a re-emergence of transport price inflation.

Implications for the Retail Industry

On Monday morning, a team of Goldman analysts led by Brooke Roach provided clients with an update on the current state of the supply chain and freight environment for the retail industry. The American Apparel and Footwear Association estimates that 53% of all US apparel, footwear, and accessories imports are routed through the East and Gulf Coast ports. The Retail Industry Leaders Association has also stated that while retailers have activated contingency plans to mitigate potential effects of work disruption, it becomes harder to mitigate the longer a work stoppage goes on.

Historic Labor Action Example

The analysts cited a historical example from 2014/15 when the West Coast port labor dispute between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association lasted from June 2014 through February 2015. This dispute delayed product launches and impacted seasonal timing of spring apparel products, with inventory drawdown during the initial period of disruption and a subsequent build in inventories which lasted through the year for many companies.

Retailers' Freight Exposure

The analysts surveyed retailers about their freight exposure at US ports. Dollar Tree, for instance, warned that half its products pass through Gulf and East Coast ports. Other retailers also warned that supply chain disruptions could spark chaos for them.

Most Flexible Retailers

Another industry survey identified which retailers would be the most flexible in an East Coast port strike environment.

President's Response

Earlier today, when President Biden was asked about "Yemen strikes," he responded incoherently to reporters, stating that he had spoken to both sides and was supporting the collective bargaining effort.

Commerce Secretary's Stance

When asked about the potential dockworkers strike, Commerce Secretary Gina Raimondo stated that she had not been very focused on that issue.

Bottom Line

The potential strike by the International Longshoremen's Association (ILA) could have far-reaching implications on the US economy, particularly the retail industry. The situation underscores the importance of labor negotiations and the potential consequences of disruptions in the supply chain. What are your thoughts on this issue? Do you think the parties involved will reach an agreement before the deadline? Share this article with your friends and sign up for the Daily Briefing, which is delivered every day at 6 pm.