By Dominic Chopping
A.P. Moller-Maersk said the U.S. dockworkers strike will affect supply chains, leading to delays in cargo movement, increased costs, and logistical challenges for businesses relying on U.S. East Coast and Gulf ports.
"Longer labor dispute durations may exacerbate disruptions, affecting import and export activities, container availability, and overall operational efficiency," it wrote in a customer advisory.
Maersk shares fell as much as 5.5% in European trade, while shares of German rival Hapag-Lloyd dipped 3.8%.
Members of the International Longshoremen's Association, which represents 45,000 dockworkers at East Coast and Gulf Coast ports, began picketing early Tuesday at cargo terminals that handle more than half of American import and export volumes as the contract with port employers expired.
The ILA is seeking a 77% wage increase over six years as a condition to sit down to talks with maritime employers, The Wall Street Journal reported, according to a person familiar with the negotiations.
The Danish shipping company said it has contingencies in place, with vessel plans that can be put into action depending on the duration of the labor dispute to minimize disruptions and ensure smooth operations.
The company already has plans to implement a local port disruption surcharge for all cargo moving to and from the U.S. East Coast and Gulf Coast terminals, ranging from $1,500 to $3,780 a container. The charge is subject to regulatory approval and depends on the impact of the disruption to the supply chain.
"This surcharge is necessary to cover the higher operational costs that will be incurred due to the service disruptions, ensuring the sustainability of our services and ongoing support for [customer] supply-chain requirements," it said.
Hapag-Lloyd also has plans to implement a $1,000 surcharge on containers due for import to the U.S. East Coast and Gulf Coast ports. It said it has contingency plans in place to mitigate disruptions to customer supply chains and is revising its vessel schedules.
"Hapag-Lloyd anticipates a substantial impact on its services...The strike will be likely leading to a significant backlog of vessels even after the strike is resolved," a spokesperson said.
Despite the disruption, shipping companies could receive an earnings tailwind from the strike action as shipping capacity tightens, eventually sending freight rates higher. Other transport providers could also benefit, with logistics firms such as DSV likely to get a boost both from higher freight rates and increased demand for its air freight services as customers look to avoid ocean transport, Sydbank senior analyst Mikkel Emil Jensen said.
About half of imports to the U.S. go through the container terminals on the East Coast, which means that just a few days of strike can have a noticeable effect and it would take weeks before the terminals have worked their way through the backlog of goods. If the ports remain closed for a couple of weeks, the supply chain wouldn't return to normal until the beginning of 2025, Jensen added.
The peak season in ocean freight tends to fall around late summer as businesses ship their goods for Christmas and Black Friday, but the peak season has been a little earlier this year due to uncertainty about the situation in the Red Sea and concerns about future tariffs from China.
"Therefore, as a starting point, companies have goods to hand in the coming months, but low inventories may weigh on sales at the start of 2025 if the strike takes hold for some weeks," Jensen said.
Analysts at Jefferies estimate the strike could cost the U.S. economy $4 billion a day.
Write to Dominic Chopping at dominic.chopping@wsj.com
(END) Dow Jones Newswires
10-01-24 0910ET