Image By King of Hearts - Own work, CC BY-SA 4.0

This month, a port strike hit the U.S. East Coast causing a major disruption to global trade. Although both parties did eventually reach an agreement, they still need to debate a number of points before a January deadline.

The basics of the conflict are straightforward and involve two key players. On the one hand, you have the US Maritime Alliance representing the interests of all US ports between the southern state of Texas to the northernmost state of Maine. On the other hand is the International Longshoreman Association (ILA), a labor union that represents over 45,000 workers at these ports.

 Every six years, both parties meet to discuss the potential increase of wages in their existing master contract—a document that outlines the benefits to be given to all members of the ILA as well as several broader provisions meant to protect ILA labor. This time, however, negotiations have encountered a number of road blocks with ILA leadership signaling the possibility of a strike as early as February of this year. If a new agreement isn’t reached by the end of September—and, more plausibly, by the end of this week, the ILA is expected to go on strike on October 1st.

Most recently, the White House announced it would not intervene in the strike, pushing for further negotiations between both actors—all but ensuring the ILA’s ability to start a protest were they to find the official proposal to be unacceptable.

There are, broadly speaking, two main sources of tensions in the negotiation process between the US Maritime Alliance and the ILA. First is the insistence of the ILA to include provisions that would control the automatization of ports, cutting union jobs in the process. In fact, experts believe that an early motive why discussions broke down was precisely over automation initiatives at the port of Mobile.

The second reason, in turn, is related to a drastic increase in wage expectations from the ILA. About a month ago, the Journal of Commerce reported that, in this new round of negotiations, the ILA was expecting a drastic increase in hourly wages of $5 an hour for each year of their agreement. This would bring ILA salaries form their current $39 an hour, to $69 an hour by 2030.

To better understand the difference in current and past ILA demands, Desteia read through the two last ILA master contracts (for the years 2012 and 2018). In doing so we noticed that the ILA had already asked for faster pay increases between these two agreements. In the 2012 master contract, the ILA asked for an increase in wages from $32 an hour to $35 an hour over a six year period. Meanwhile, the 2018 master contract asked for wage increases of roughly $1 an hour for each year of the agreement—bringing salaries up to $39 an hour by 2024. Now, the 2024 proposal is to increase the yearly increases five fold.

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Part of the ILA logic stems from the fact that, in recent years, shipping has lived through a number of booms. First during the COVID-19 pandemic, as global demand increased, the average price to ship a single 40 ft container reached a high of over $10,300. Similarly this year, as Houthi rebels have blocked any trade through the Red Sea, container rates have reached costs of up to $5,900—although, more recently, they’ve begun a steady decline across most major trade routes, including those with US ports as a final destination.

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The impact of these protests cannot be understated. Earlier this year, we at Desteia put together a comprehensive report gathering crucial data points on all ports in North America. Amongst them, we included the TEUs handled between 2018 and 2023 for all major ports in the region. From these efforts, we can tell that ILA ports (namely, those in the US East Coast) accounted for 48.04% of all US trade in 2023. Not to mention that, a single day disruption to East Coast ports in the US could stop the flow of as many as 79,705 TEUs. Namely, every day of these protests could inhibit nearly 80,000 containers from entering the US

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Not surprisingly, given the potential impact of these protests, shippers galore have started to take note. Months before the protests themselves were to begin, there were already worrisome signs. 

Take just two four largest ports in the US by TEUs handled as a metric. The two largest—LA and Long Beach—are both located on the West Coast where no labor disruptions are expected to take place. The third and fourth, on the other hand—New York and Savannah—are on the East Coast.

While all ports considered have registered considerable year to year growth across 2024, data suggests that ports in the West Coast have started to grow at an accelerated rate. This, for the most part, is a recent phenomenon as L.A. has maintained similar or worse growth rates than its competitors on the East Coast. In July, New York and Savannah saw the number of containers handled per month increase by 11.1% and 9.28% respectively when comparing to last July. Meanwhile, during that same month, L.A. experienced a 37.3% growth in containers handled while Long Beach continued to break records with a 225.5% increase in handling capacity.

So it’s not just that the ILA strikes could disrupt trade in the near future. The graph above already shows some early signs that shippers are making bold bets in the West Coast, drastically increasing the amounts of containers shipped to California instead of the East Coast.

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