US Port Union Hits Shipping Companies for Excessive Profits
Fees Rose from $6,000 to $30,000
Concerns Over Soaring Sea Freight and Logistics Crisis if Strike Prolongs
On the 1st, the International Longshoremen's Association (ILA), which led the strike at a port in the southeastern United States, directly criticized the excessive profits of shipping companies represented by the United States Maritime Alliance (USMX).
In a press release on the 30th, the ILA stated, "The maritime carriers represented by USMX want to enjoy billions of dollars in huge profits in 2024," adding, "The ILA union is fully entitled to be compensated for moving and growing American commerce." It further criticized, "It is shameful that most foreign-owned shipping companies engage in 'Make and Take' operations," and said, "They want to make billions of dollars in profits at American ports. They are trying to drain the backbone of American ILA workers and take those profits out of the U.S. to put into the pockets of foreign multinational corporations."
The ILA particularly stated, "Maritime carriers are exploiting customers by increasing costs for American consumers," and said the following:
"They are now charging $30,000 (about 40 million KRW) per container, which is a huge increase from just a few weeks ago when it was $6,000 (about 8 million KRW) per container. It rose rapidly from $6,000 to $18,000, then to $24,000, and now it is $30,000. This is unprecedented. They are killing their customers."
According to the "Urgent Analysis of Major Issues Including Labor Negotiations at U.S. East Coast Ports" released by the Korea Maritime Promotion Corporation on the 30th, since East Coast ports handle a significant portion of the total container volume in the U.S., if operations are halted due to union strikes, the damage to the overall U.S. economy is expected to be considerable.
The shutdown of East Coast ports is also expected to have a notable impact on the global supply chain, causing a real reduction in container ship supply and acting as a factor for rising freight rates. Disruptions in cargo handling, port congestion, increased logistics time, route detours, freight rate hikes, and increased logistics costs due to various expenses will become inevitable. If the situation prolongs, it is feared that issues such as inventory shortages and container equipment shortages will spread.
Specifically, if the union strike causes a port shutdown, disruptions will occur in ship arrivals and departures as well as terminal cargo handling operations, leading to port congestion and backlog. Consequently, the time required for the supply chain is expected to increase. Shippers are likely to reroute cargo destined for the U.S. East Coast to the West Coast ports such as Los Angeles and San Francisco, to Central and South American regions like Mexico and Panama, or to Canadian ports such as Montreal and Halifax, then use inland transportation like rail and trucks to move goods to the East Coast. Since the U.S. West Coast, Central and South America, and Canada will have to handle volumes previously managed by the East Coast, concerns about increased port congestion and logistics delays are rising. Demand for inland transportation within the U.S. will increase, leading to higher inland transportation rates. The increase in inland transportation volume will also cause delays in transit times. Demand for air cargo for urgent shipments may also rise, potentially causing additional increases in air freight rates.
The distribution and retail sectors are expected to face difficulties in securing and managing inventory due to disruptions in the supply of raw materials and products. For perishable fresh foods such as fruits and meats with short shelf lives, delayed delivery could lead to spoilage and unsellable goods. If supply is not smooth, shortages and price increases may also occur. If port congestion worsens, delays in the return of empty containers will cause container equipment shortages. If equipment shortages intensify, export-oriented Asian countries may face difficulties in smooth exports due to container shortages. As inland transportation volume in the U.S. increases, transportation equipment such as chassis may also become scarce.
The report stated, "U.S. President Joe Biden can issue a forced return-to-work order under the Taft-Hartley Act, but with the presidential election scheduled for early November, government intervention in negotiations is uncertain," adding, "However, during the 2012 labor negotiations at U.S. East Coast ports, the government intervened to mediate and extended the negotiation deadline, so government involvement cannot be completely ruled out."
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