Experts: “When A Port Closes Down It Is Not An Immediate Impact, It Is A Ripple Effect Until Things Normalize”

The looming strikes at U.S. ports’ will be yet another major supply chain disruption in the post-COVID era. As a result, experts have warned that a ripple effect is about to be unleashed in the global shipping market.

Stamatis Tsantanis, Chairman & CEO of Seanergy Maritime and United Maritime, says that “when a port closes down it is not an immediate impact, it is a ripple effect until things normalize. A port shutdown creates a backlog of ships and the backlog of ships takes it then a longer to its next destination and then to the next destination. So that impact doesn’t happen immediately but you feel the impact down the line months after. Every idle day that a ship does not get into the port costs money and sometimes a lot of money which only increases the customer cost and then that ultimately gets passed onto consumers”.

“The impact of a strike now is going to be way more impactful for Christmas and not next week, or the week. Those ships will take longer to do their round and come back and that creates a backlog. Now that everybody’s stocking up for Christmas because now is the time when it actually impacts the Christmas shopping season. This is the worst possible time for a port strike since it will potentially affect the Christmas shopping season, because there might be shortages or things may not arrive in time. I’m not saying kids will not have toys for Christmas but it can seriously affect goods coming into the U.S.”, he says.

Tsantanis added that “the consumer will be impacted because this impacts consumer products first. This includes things that we buy in the supermarket or things we get in the story everything from clothes to toys. In the transportation of goods and services, it’s not just port strikes but also weather impacts that tend to make things more expensive because ships run on regimented schedules. If things are delayed that creates a cumulative effect that impacts the next port and then the port after that and it has a ripple effect.
Port strikes are rare and people in the shipping industry are used to weather delays which are similar because when you get weather delays, it’s pretty much the same as a strike. Things like a cycle, typhoon, or hurricane impact the whole supply chain and that’s very bad for the consumer. You don’t see the effect immediately since the backlog it creates can take weeks to manifest. In the shipping business, you expect the ports to be open and working.”, Seanergy Maritime’s head concluded.

On a similar note, Eric Clark, portfolio manager at Accuvest Global Advisors, commented that “this certainly has the possibility of being a very bad outcome. The Labor Union’s job is to get the best wages for workers, but our ports are woefully inefficient relative to other global ports. These unions fight innovation and automation and the more they try and hold the economy hostage for personal gain, the more this innovation and automation will be forced on them. They know how important East Coast ports are to the economy, so they have a strong hand, and they are playing it forcefully here. I would be shocked if this lasted more than a week due to the domino effects from the strike growing exponentially the longer a strike happens. The Fed can’t fix the inflation problem that would be created from these stoppages. Given the election looming, Biden won’t push the Taft-Hartley card and it’s likely too close to the strike date to get that done anyway. Ryan Peterson of Flexport has a pinned tweet 19 hours ago where he goes through the possibilities, that’s likely the best info on what could happen”.

Clark added that “from our perspective, any strike that lasts more than 1 week could cause goods shortages for the holidays. Retailers are running lean currently so inventory would get drawn down, and prices of shipping, and goods prices would go vertical for a period of time. We could get the kind of inflation for 6 months similar to or worse than peak inflation levels a year ago. He reminds us all trade=50% of GDP and 70% of trade flows through our ports. West Coast ports are already running at capacity so re-routing really won’t help. If the strike lasts longer, our rail and trucking infrastructure could be affected. I don’t think it comes to this because of the negative headlines and the public will turn on the Longshoreman. The bottom line, our ports and infrastructure are not competitive versus global peers because the unions fight innovation and automation, and we allow it to happen. This will eventually force change, so the unions are just thinking too short-term, in the long term they are just sowing the seeds of their own decline”, he concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide