Key Points:

• The recent port strike on the East/Gulf Coast ended after a tentative agreement raised dockworkers' wages by 61.5% but left a master contract unresolved, raising the risk of another strike in early 2025.

• Key issues include union opposition to automation, which employers argue is necessary for efficiency.

• Promo leaders say industry impacts from the October strike will be minimal, but are monitoring the union talks and preparing to adapt sourcing practices if need be should another work stoppage look likely.

Last week’s port strike that presented a grave threat to the supply lines of the promotional products market and other industries is over, but the contract dispute that caused it continues, raising concerns that another work stoppage could be on the horizon for early 2025.

At midnight on Oct. 1, 50,0000 union members of the International Longshoreman’s Association (ILA) walked off their jobs at East and Gulf Coast ports and took to the picket lines. The strike launched after a new contract for the dockworkers wasn’t inked by the prior contract’s end on Sept. 30.

It came to a conclusion three days later after the ILA and U.S. Maritime Alliance (USMX), a management group that represents shipping carriers, terminal operators and port authorities, reached a tentative agreement that will see the union members pay hiked by 61.5% over the life of a new six-year contract.

Still, the preliminary deal on pay didn’t establish a new master contract; it just opened the door to get the ILA back to the bargaining table with USMX to hammer out a complete deal. It also extended the previous contract until January 15, 2025 – at which time the union could strike again if the new six-year contract hasn’t been finalized.

Automation Angst & Strike Outlook

Some analysts think there’s considerable potential for another strike in the early new year. Why? Because union leaders are insisting that they will not agree to the implementation of automation or semi-automation at East/Gulf Coast ports, while USMX is keen to introduce some automation to accomplish what its members believe will be significant efficiency gains.

“The recent strikes may have ended, but the storm is far from over,” said Christian Roeloffs, cofounder and CEO of Container xChange, a global online marketplace for container trading and leasing. “Given the unresolved issues around automation, I believe there are strong chances of another disruption in January. The unions strongly oppose any form of automation, and this unresolved matter raises the likelihood of another strike in January.”

How's this for a Happy Friday: The massive #strike at East/Gulf Coast ports that presented a dire threat to the #promoproducts supply chain has ended, though we're not totally out of the woods. Here's where things stand and what it means for the industry: https://t.co/tG11xo1V6q

— Chris Ruvo (@ChrisR_ASI) October 4, 2024

Roeloffs is not the only shipping industry expert to think so.

“Automation at ports will remain a major stumbling block,” Peter Sand, chief shipping analyst at supply chain intelligence firm Xeneta, told CNBC. “We could see further strike action.”

The ILA negotiated restrictions on automation and semi-automation in the previous contract. However, it wants to dig its heels in deeper this time around, tightening the language to make plain that “no automation means no automation,” the union said in a statement.

The ILA believes the introduction of automation/semi-automation will ultimately put many of its members out of work. The ILA is intent on “fighting to guarantee that ILA members continue to handle key tasks at port facilities, such as manning cranes and servicing equipment, preventing employers from outsourcing these jobs to nonunion workers or automated systems,” it said in a statement.

In the negotiations over the next several months, the union plans to “establish strong protections against the introduction of remote-controlled or fully automated machinery that threatens our jurisdiction.”

About 700,000
American jobs have been lost over the past 30 years due to automation, most of them in manufacturing and blue-collar work. (MIT Economist Daron Acemoglu)

American ports typically rank below their counterparts in places like Europe and China when it comes to productivity. Critics say lack of automation at U.S. ports is a factor in that.

Employers maintain that better-streamlined port operations will bring in more cargo, helping to create more dockworker jobs. They also say automation will generate new additional roles to be filled by humans. Some reports have indicated that USMX agreed to the steep 60%+ wage hike as an olive branch to the union for loosening its firm stance on automation.

“USMX’s goal continues to be focused on ratifying a new master contract that addresses all the critical issues the parties need to bargain,” USMX has said.

In addition to automation, the ILA and USMX need to reach agreements on healthcare coverage for union members and container royalties – payments that compensate longshoremen for decreased employment opportunities that have resulted from the use of containerized shipping. The union wants all royalty payments to go exclusively to workers.

“Employers have tried to reduce these benefits or claim a share of container royalty funds, but we are standing firm to keep them fully within our union control,” the ILA said in a statement.

Promo’s Eyes on the Ports

Last week’s strike caused cargo backlogs at ports that will take a few weeks to clear.

Still, promotional products sourcing leaders said that, given the short duration of the work stoppage, any impacts to the merch industry should be minimal.

Put another way, the promo inventory shortages and product price increases that could result from a lengthier strike are not expected as a result of the October union action.

While that’s good news for the merch market, which imports the vast majority of the items it sells from overseas manufacturers, industry supply chain leaders continue to have their eyes on the ILA/USMX contract negotiations.

“We are not out of the woods yet,” Chris Anderson, CEO of Counselor Top 40 supplier HPG (asi/61966) and a member of Counselor’s Power 50 list of promo’s most influential people, told ASI Media.

Yuhling Lu, co-owner of Counselor Top 40 supplier Ariel Premium Supply (asi/36730), has some apprehension, too. “I still have small concerns about a strike happening because about automation is a major sticking point, and that may not be solved as quickly,” Lu told ASI Media.

John Janson said he sees potential trouble ahead.

“There’s a lot of posturing on both sides surrounding automation,” said Janson, vice president of global logistics at Counselor Top 40 supplier SanMar (asi/84863). “U.S. ports need automation to compete with global ports like Shanghai, Antwerp and Singapore. When the two sides last met, the ports asked for a ‘no-strike’ clause with the agreement of increased wages and the union declined. At this point, I think a work stoppage is less likely but the threat still looms.”

It would be wise, Anderson and others said, for suppliers to keep implementing savvy sourcing practices that they learned during the pandemic supply chain crisis and again used in the months leading up to the strike. Those include beefing up safety stocks and ordering product farther in advance from overseas manufacturers to allow for the goods to arrive by desired dates given potentially increased ocean cargo transit times.

“We are not out of the woods yet.”Chris Anderson, HPG (asi/61966)

Other industry executives are also closely following developments in the union contract talks. They’re hopeful another work stoppage will be avoided.

“We are optimistic that with the wage negotiation completed, the potential for another strike in January will be minimized,” Tim Behling, vice president of supply chain at Massachusetts-headquartered Counselor Top 40 supplier Gemline (asi/56070), told ASI Media. However, Gemline “will continue to monitor the contract negotiations over the next two months before making any key decisions prior to Chinese New Year (beginning at the end of January).”

Jing Rong – HPG’s vice president of supply chain and sustainability – expressed a similar view, telling ASI Media that she believes a January strike will be avoided and is hopeful that a final deal will be completed by December.

“But,” she added, “if I do not see a final contract sign-off in early December, we will look to bring inventory to North America early prior to the Chinese New Year closure.” Factories in China close for the annual new year tradition.

One thing’s for sure: The supply chain situation is never dull these days. Other challenges like port congestion in Europe and longer shipping times – significantly a result of militant attacks in the Red Sea that have forced rerouting of commercial ships – are some of the other variables with which industry sourcing leaders are contending. So far, they’ve kept the industry well-stocked – and aim to continue to do so.

“It promises,” says Anderson, “to be a bumpy ride for the foreseeable future.”