US dockworkers strike, halting half the nation’s ocean shipping

U.S. East Coast and Gulf Coast dockworkers began their first large-scale strike in nearly 50 years on Tuesday, halting the flow of about half the country's ocean shipping, after negotiations for a new labor contract broke down over wages.

The strike blocks everything from food to automobile shipments across dozens of ports from Maine to Texas, in a disruption analysts warned will cost the economy billions of dollars a day, threaten jobs and potentially stoke inflation.

The International Longshoremen's Association union, which represents 45,000 port workers, had been negotiating with the United States Maritime Alliance (USMX) employer group for a new six-year contract ahead of a midnight Monday deadline.

The ILA said in a statement it shut down all ports from Maine to Texas at 12:01 a.m. ET (0401 GMT) after rejecting USMX's final proposal, adding the offer fell "far short of the demands of its members to ratify a new contract".

The ILA's leader, Harold Daggett, has said employers such as container ship operator Maersk and its APM Terminals North America have not offered appropriate pay increases or agreed to demands to stop port automation projects that threaten jobs.

"We are prepared to fight as long as necessary, to stay out on strike for whatever period of time it takes, to get the wages and protections against automation our ILA members deserve," Daggett said on Tuesday.

The USMX said in a statement on Monday it had offered to hike wages by nearly 50%, up from a prior proposal. Daggett, meanwhile, said the union is pushing for more, including a $5 per hour raise for each year of the new six-year contract.

USMX did not immediately respond to requests for comment.

Hundreds of dockworkers demonstrated on Tuesday at a New York City area shipping terminal in Elizabeth, New Jersey, carrying signs and shouting slogans as music blared and vendors hawked food. Daggett arrived to rally them with cheers of "ILA all the way!"

"Everything that comes in this country comes from the containers off these ships that my men work. And I want the world to know it. Don't come after us saying we're greedy. Go after those greedy bastards that own these companies in Europe," Daggett told reporters.

The strike, the ILA's first major stoppage since 1977, is worrying businesses that rely on ocean shipping to export their wares or secure crucial imports. It affects 36 ports - including New York, Baltimore and Houston - that handle a range of containerized goods from bananas to clothing to cars.

The walkout could cost the American economy roughly $5 billion a day, JP Morgan analysts estimate, as shipments are disrupted.

French shipping group CMA CGM, the world's third-largest container shipper, on Tuesday issued a force majeure notice over the strike, and said it may charge additional shipping fees for delayed vessels.

The National Retail Federation, meanwhile, called on President Joe Biden's administration to use its federal authority to halt the strike, saying the walkout could have "devastating consequences" for the economy.

U.S. Representative Sam Graves, a Republican who chairs the House of Representatives' Transportation Committee, also called on Biden "to immediately intervene to avoid this unnecessary harm to our economy."

Biden officials have repeatedly said the Democratic president will not do so, while urging both sides to come to an agreement.

The dispute is wedging labor-friendly Biden into a virtual no-win position, with Vice President Kamala Harris in a razor-thin race for the White House with Republican former President Donald Trump.

White House Chief of Staff Jeff Zients and top economic adviser Lael Brainard urged USMX board members at a meeting on Monday to resolve the dispute fairly and quickly, a White House official said.

The White House on Tuesday said in a statement it is monitoring the effects on the supply chain and assessing ways to address potential impacts, noting the initial effect on consumers is expected to be limited.

Officials told Reuters on condition of anonymity they are hoping for a short strike, noting the two sides had narrowed their differences.

The U.S. Department of Agriculture said on Tuesday that it does not expect significant changes to food prices or availability in the near term.

Grocery chain owner Ahold Delhaize also said it expected minimal short-term impact on its supply chain.

"We will continue to monitor the situation in the weeks ahead. We hope the parties resolve the situation very soon," said the company, which owns the Food Lion and Hannaford chains.

BACKUP PLANS

Retailers accounting for about half of all container shipping volume, along with other shippers, have been busily implementing backup plans as they head into their all-important winter holiday sales season.

Many of the big players rushed in Halloween and Christmas merchandise early to avoid any strike-related disruptions, incurring extra costs to ship and store those goods.

Retail behemoth Walmart, the largest U.S. container shipper, and membership warehouse club operator Costco say they are doing everything they can to mitigate any impact.

Danish drugmaker Novo Nordisk, meanwhile, said it has workaround plans in place to minimize or prevent any disruption to its production, including by using air freight, CNBC reported on Tuesday, citing a company spokesperson.

Lars Jensen, CEO of shipping consultancy Vespucci Maritime, said the strike is unlikely to lead to any critical shortages, but could raise costs for consumers if it is prolonged.

"At the end of the day, the only one who's going to end up paying the bill for this is the U.S. consumer, simple as that, because import costs are going to rise and those costs are going to be passed on to all the imported products," he said.

More than 38 container vessels were waiting at anchor near U.S. ports by Tuesday, compared with just three on Sunday, according to Everstream Analytics.