US averts supply chain crisis with port strike deal

As we detailed overnight, the union behind the 45,000 striking dockworkers has agreed to end a three-day strike that has paralyzed major US Eastern and Gulf Coast ports. This was a major risk of becoming yet another shitstorm for the Biden-Harris team, which was already dealing with a president completely out of…

And, my God, if Biden’s sanity has blown up – just like Bidenomics – then who the hell is in charge of the nation with the growing risks of World War III in the Middle East? Iranian hypersonic missiles rained down on Israel just a few days ago.

Meanwhile, the International Longshoremen’s Association and the US Maritime Association have reached a tentative labor agreement, with union members returning to work. The agreement would extend the previous employment contract until January 15.

The good news is that the ports are reopening this morning. The bad news is for those who hold long positions in shipping stocks.

Goldman told clients this AM:

Our Asian shipping basket (GSXASHIP -4.8%) was one of the worst performers in the region after US dock workers agreed to call off their strike, tempering expectations that container rates will rise due to reduced supply. COSCO Shipping -7.3%, SITC -10.5%, Orient Overseas -8% all fell in HK trade.

Separately, here’s what other offices are saying about the temporary resolution between the ILA and USMX (courtesy of Bloomberg):

JPMorgan

• Analyst Alexia Dogani says a prolonged strike would have had a global impact on supply and demand
• However, given that the strike lasted only 72 hours, it sees limited side effects and expects freight rates to normalize
• notes that shipping stocks could be under pressure given the gains of recent weeks, expecting a positive impact on spot rates from a strike that has not materialized

Stifel

• The tentative agreement is a welcome development, says analyst J. Bruce Chan, and the three-day work stoppage is expected to be manageable.
• Companies hit hardest this week are expected to see short-term growth once business returns to normal

Jefferies

• Analyst Chloe Lemarie says the tentative deal removes the risk of further disruption later in the year

Crisis averted, for now…

* * *

If you just bought 10 years worth of toilet paper, you might want to check if you still have the receipt.

Late Thursday, 45,000 striking port workers at US Eastern and Gulf ports agreed to return to work after port operators sweetened their contract offer, ending a three-day strike that threatened to disrupt the US economy.

The International Liquidators Association and the port operators, in a joint statement, said they had reached a tentative agreement on wages and union members would return to work. They said the deal would extend the previous contract, which expired earlier this week, until Jan. 15, 2025, while the two sides negotiate other issues, including dock automation.

The discovery came later port employers offered a 62% pay rise over six years, THE The WSJ reported citing people familiar with the matter. The new offer, up from a previously proposed 50% increase, came through after the White House publicly and privately pressured the major shipping lines and cargo terminal operators that employ the longshoremen to make a new union offer.

The deal ends a strike that has shut down container ports from Maine to Texas and threatened to disrupt everything from the supply of bananas to supermarkets to the flow of cars through America’s factories and cost the US economy billions every day in trade lost.

The latest offer would raise the base hourly rate for ILA dock workers to $63 from $39 over six years. One of the people said the offer was made on the condition that the dock workers return to work and agree to increased efficiency.

The offer is less than the union’s demand for a 77 percent raise over the life of the contract, but a much larger increase than most major labor contracts, including a contract struck last year that covers the separate union representing West Coast workers. Many US dock workers currently earn more than $100,000 a year, with base hourly wages boosted by work rules and overtime requirements.

The strike came about five weeks after a presidential election in which both leading candidates are appealing to working-class union voters. Both Vice President Kamala Harris and former President Donald Trump have expressed support for the workers, pointing out that the carriers are largely foreign-owned.

Top White House aides have been in frequent contact with employers, reiterating that Biden does not intend to use his federal power to end the strike. “This is the first strike in 50 years — these people know how to get to yes,” said Agriculture Secretary Tom Vilsack, speaking to reporters aboard Air Force One. “It just has to come to yes.”

The resolution closed some of the country’s main gateways to imports of food, vehicles, heavy machinery, construction materials, chemicals, furniture, clothes and toys. Many manufacturers and big retailers, with their busy fall shopping season just getting started, said they could withstand a short strike as they brought in products earlier than usual this year and diverted other goods to ports from the West Coast. But executives said a walkout lasting a week or more would increase shipping costs and could trigger product shortages.

The International Longshoremen’s Association said it had agreed to extend the contract until January 15 and work would resume.
Container ports from Houston to Miami to Boston have been closed since the labor contract between the ILA and the US Maritime Alliance, which represents terminal operators and shipping lines, expired on Tuesday.

Dozens of ships carrying containers and cars have docked off the coast of major trade hubs, including New York, South Carolina and Virginia, in recent days.

It remains to be seen whether other U.S. unions will also go on strike in hopes of repeating the stunning wage gains just handed to the Longshoremen. If so, watch the color drain from Powell’s face as wage inflation hits double digits in the coming months.

By Zerohedge.com

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