The strike, which began Tuesday and impacted 36 ports from Maine to Texas, was resolved sooner than anticipated, causing shipping stocks to decline as expectations of surging freight rates subsided. “The strike ended fairly quickly, removing any significant downside risk to the economy this quarter,” said Ryan Sweet, Chief U.S. Economist at Oxford Economics.
At the height of the strike, 54 container ships had lined up outside major ports, delaying the unloading of goods ranging from auto parts to fresh produce. Additional ships are expected to arrive, further contributing to congestion. According to pricing platform Xeneta, normal cargo flow is expected to resume in two to three weeks. “It’s not just about handling the ships already in line; ports must work extra hard to reduce congestion and restore supply chain efficiency,” said Xeneta Chief Analyst Peter Sand.
The deal, announced late Thursday, followed pressure from the Biden administration to resolve the dispute before it could further impact the economy. Sources revealed that the wage agreement includes a 62% increase over six years, raising the average wage from $39 to $63 per hour. However, the agreement only extends the current contract to January 15, leaving unresolved issues such as automation, which workers fear could result in job losses.
The strike, launched by 45,000 members of the International Longshoremen’s Association (ILA), marked the first major stoppage since 1977. JP Morgan analysts estimated the strike had the potential to cost the U.S. economy $5 billion per day. The disruption also presented a challenge for President Joe Biden's administration, with the upcoming presidential election approaching.
The strike's end triggered declines in shipping stocks, with companies like A.P. Moller-Maersk and Hapag-Lloyd experiencing notable losses in Asia and Europe. According to Tony Huang, an analyst at Taishin Securities Investment Advisory, "Shipping stocks had rallied on the expectation of price hikes, but the resolution of the strike and tensions in the Middle East contributed to the drop."
In a statement, the National Retail Federation welcomed the tentative deal. "The decision to reopen the ports is good news for the nation’s economy. The sooner a final agreement is reached, the better for American families."
Retailers such as Walmart, IKEA, and Home Depot, which account for about half of container shipping volume on the East and Gulf coasts, had stocked up ahead of the holiday season, mitigating the potential impact of the strike on product availability. However, coffee prices have seen an uptick due to the disruptions.