Longshoremen's strike impacts rubber, auto industries

More than 45,000 dockworkers at 14 ports from New Jersey to Texas went on strike today after talks between the International Longshoremen's Association union and United States Maritime Alliance failed to result in a contract.

The Longshoremen's contract expired Sept. 30.

West Coast dockworkers were not involved in the strike as they belong to a different union.

Dockworkers, the Associated Press reports, are seeking a 77-percent pay increase over the life of the six-year contract and are seeking to limit the use of automation. This marks the first coastwide strike by the union since 1977.

Whitney Luckett, president of supply chain solutions firm Simko North America L.L.C., noted that the impacts of the strike are far reaching, particularly if it drags on for days or weeks.

"The best rule of thumb on the matter is that you can assume that every day the strike goes on, you can lose five to seven days of productivity," Luckett said. "At this point, operations will not return to normal for another week or so. And I don't see that changing at all.

"Our hope is that they can only really strike for three days and still continue to be paid. But that still puts you out to not returning to normal operations until the end of October at the ports."

Another component to the strike that could keep rubber industry executives up at night is the fear that cargo could be re-routed to Canada, Mexico or elsewhere.

"If this thing goes on for too long, they are just going to start dumping containers in the Bahamas," Luckett said. "And, at that point, you are talking about really, really significant delays on cargo reaching customers. I do think it is going to have a huge effect. … It is going to be chaos."

Mahesh Srinivasan, a University of Akron professor and director of the Institute for Global Business at the University of Akron, agrees that the impacts of the strike could be far reaching, impacting everything from fruit to furniture—and of course the rubber industry.

Primarily, Srinivasan said, the port closures impact the import of goods from Europe and South America. But some Asia-region imports could be impacted, too. That's because, in recent years, the Gulf Coast ports have become critical for suppliers who looked to avoid the West Coast.

"Given that there has been historic congestions at the West Coast ports, what a lot of the shipping companies and retailers have done—if you just think of it in the last 10 years—they have diverted a lot of supply to the Gulf to deal with those typical congestions," Srinivasan said. "And it is not going to be easy to just switch back. … That is very hard to do.

"A majority of what comes from Asia comes through the West Coast, but there is still a good amount of merchandise that comes through that does come from the Gulf, too."

When it comes to sorting out the cargo issues in the wake of the strike, Luckett noted that the rubber industry likely will not be a priority, given that perishable items are among the first containers to be addressed.

"Another side affect of this whole mess is that there are at least one or two steamship companies that say they are not going to move dangerous goods," Luckett said. "Whether we want to admit it or not, the rubber industry does use dangerous goods in some of our chemicals. So that in itself is going to be a bit a problem for us, too."

To understand the kind of impact that the port closures could have overall, the National Association of Manufacturers notes that 68 percent of all containerized exports and 56 percent of containerized imports flow through the 14 ports impacted by the strike. This represents a daily trade value of about $2.1 billion, NAM said.

Moreover, those ports account for more than 76 percent of vehicle exports and 54 percent of containerized vehicle imports, according to NAM.

MEMA, the Vehicle Suppliers Association, is keeping a close eye on the matter and has contacted legislators with their supply chain concerns. The association and NAM were among the roughly 175 organizations and associations who signed a Sept. 17 letter to President Biden urging the administration to take action.

"The administration needs to provide any and all support to the parties in their negotiations. In addition, the administration needs to be ready to step in if a strike or other action occurs that leads to a coast-wide shutdown or disruption," the letter reads.

In his own letter to members on Sept. 30, MEMA President and CEO Bill Long said that the association is monitoring the situation and will advocate for a swift resolution.

"MEMA is treating this situation as a priority concern," Long wrote in a letter to members Sept. 30. "Our Washington D.C. team is engaging closely with sources in the government and with experts who are close to the situation, and we will keep you updated with the latest developments."

Sig Huber, chief commercial officer for Elm Analytics L.L.C., noted that the automotive industry supply chain is fairly resilient, particularly at the OEM level. Auto makers and many suppliers, he said, have been preparing for the port closures.

"Automotive is one of the industries that is going to be most impacted. I think that at the OEM level they have been planning for a strike for a while and they have pulled ahead shipments from overseas and made some alternative arrangements," Huber said.

And while that may be true, the auto industry isn't immune from major impacts. And its likely that the smallest suppliers could take the biggest hits, Elm Analytics CEO Tor Hough told Rubber News.

"This is a really bad time for something like this to occur," Hough said. "We talk in terms of measuring the resilience of automotive suppliers and we've been through a period where the volumes being manufactured by the OEMs at the bottom of the supply chain have been variable or inconsistent.

"So, as we monitor the financial health of the suppliers upstream from them, what we are seeing in data today is that the liquidity of the smaller companies is falling off and this kind of thing isn't going to do anything but make that worse."