Threat of ‘calamitous’ port strike awaits trucking in January

Shippers’ demand for freight movement changed significantly ahead of the strike. Peak shipping season occurred much earlier than usual to accommodate the risks posed by the labor dispute, according to Croke.

ILA warned of a strike more than a year before it occurred, giving shippers plenty of time to move inventory before the work stoppage. This movement of inventory before a several-days-long stoppage made a noticeable impact on the timing of container movement.

“This is a period in time where labor agreements have a profound impact on the freight market. Importers have been pulling forward all of their inventory; peak shipping season happened six to eight weeks earlier this season, because of the fear of a strike and a shutdown, which was telegraphed almost a year ago,” Croke said. “We had a record number of containers, ever, in the month of September.”

Shippers knew in advance that 2024’s peak shipping season would come early as a direct consequence of the East Coast port labor dispute. Logistics experts recommended freight customers prepare to start in June instead of July. In September, the busiest U.S. ports handled near-record container imports.

Shippers’ freight demand changed not only in timing but also destination, with peak shipping on the West Coast coming earlier than usual. In September, the ports of Los Angeles and Long Beach both had their busiest peak season on record.

Major shippers with goods originally destined for the East Coast redirected their cargo through West Coast ports to be transloaded to their destination. This brought some extra volume to for-hire trucking.

FTR Transportation Intelligence found a similar effect from Hurricane Helene: Average broker-posted rates in Truckstop jumped by 8 cents in the week ending Oct. 4. The rate increase was strongest in the Southeast. According to FTR, the average broker-posted spot rates rose to their highest level since early August—and dry van, refrigerated, and flatbed rates all saw the sharpest rate increase for a comparable week since at least 2008.

Including a fuel surcharge, FTR’s average rate for the week was only up 0.4% year over year—but was notably the first y-o-y increase since July. Excluding a fuel surcharge, the average rate was 11% higher than the previous year.

Why rates remained low

Why didn’t the port strike make a significant impact on trucking rates? Shippers had plenty of time to plan around the danger of a few days’ work stoppage; overcapacity in the spot market remained strong; East Coast port freight doesn’t directly translate to spot market carriers; and the strike ended quickly.

The factors keeping freight rates low (carrier overcapacity, most notably) remained the same regardless of a port work stoppage.

“We’ve still got an oversupplied market. It was just a shift of when the volume got moved as opposed to a substantial change in supply and demand,” Croke said. “The demand just moved in terms of timing.”

The cargo most affected by the strike had little influence on long-haul truckload operations. East Coast freight is mostly a drayage function that does not translate directly to the spot market.

“Container imports represent only about 10% of truckload demand. Domestic manufacturing is the big driver now,” Croke said. While container import disruptions may eventually slow domestic manufacturing output, those effects are less direct.

Port strike threat is not over

The strike may have ended, but the labor dispute is far from done.

ILA and USMX kicked the ball down to January 2025 for renewed negotiations. The opportunity for industry disruption still looms around the calendar—at another peak shipping period.

“This is still not over,” Croke said. “There’s a chance that it could disrupt the market. It’ll occur again right in the middle of peak shipping ahead of Chinese New Year.”

Chinese New Year effectively shuts down manufacturing in China for two weeks in early February.

"If you have a strike on January 15, and that’s in the middle of trying to get inventory ahead of the Chinese New Year slowdown, you could see an even bigger disruption to the market,” Croke said.

In addition, with the new deadline taking place after a U.S. election and a week before the next president’s inauguration, political motivation and sway of a lame duck president to intervene is significantly reduced.

As shippers prepare their inventories in advance of the next labor dispute deadline, ports can expect the Christmas slowdown to be a little more busy than usual.

Automation is a complex problem

The most contentious issue in the dispute between ILA and USMX is much more difficult than simple wages: port automation. Automation threatens the employment prospects of dock workers, the unions contend, but ports also face pressure to increase efficiency with novel technologies.

ILA demands a permanent ban on automation for its next contract, which is a difficult promise to fulfill.

“Because it’s automation, this is a much bigger sticking point than salary or hourly wages. This is about people’s jobs,” Croke said. “That kind of makes the likelihood of hostile negotiations fairly high. It’s a tougher one to resolve than just saying ‘We’ll give you a pay raise.’”

A longer strike could disrupt trucking

With the question of automation still unresolved, a January 15 strike might last much longer than it did in  October.

The average U.S. labor strike lasts about 40 days. Larger strikes tend to be briefer—but ILA’s roughly three-day-long strike in October was very short. A longer ILA strike may have lived up to news organizations’ apocalyptic rhetoric.

“If that strike had gone on, it would have been calamitous,” Croke said. “It would have had an impact on capacity if it had gone on longer because it would have forced a lot of carriers out of the industry; you would have seen capacity decrease dramatically.”

Drayage carriers are particularly vulnerable in the freight space, according to Croke.

“They don’t necessarily run very new equipment. They don’t make a lot of money,” Croke said. “If that [strike] had gone on much longer, I don’t know how many of them would have survived more than a week.”

Significant disruptions to their cash flow could quickly shut down these carriers, bringing supply and demand out of balance as carriers’ capacity plummets.

“You would have seen a fairly rapid exodus of capacity out of the industry, and that would have resulted in rates turning up pretty quickly,” Croke said.