Chaos is building for shippers as U.S. port strike continues and costs rise

Chaos is building for shippers as U.S. port strike continues and costs rise

Lori Ann LaRocco

• As the East and Gulf coast ports strike hits day three on Thursday, there are multiple signs of supply chain stress building.
• Thousands of shipping containers were potentially dumped at the wrong ports as ocean carriers scrambled to find alternate options for cargo, and increased tracking of diverted vessels is a direct challenge to an ILA union threat to stop unloading at other ports.
• Surcharges imposed by shipping giants are starting to mount, and the need to use inland transportation options like trucking and rail for diverted cargo are adding to costs.
• A major grocery chain CEO tells CNBC that while it is well stocked for weeks to come, some go-to items will not be available and prices on items like bananas will rise significantly.

As the East and Gulf coast ports strike hits its third day on Thursday, the nationwide logistics system is beginning to show signs of stress, with thousands of containers dumped at the wrong ports and billions of dollars in trade at anchor on ships. Ocean carrier surcharges for shipping clients are beginning to mount, and the need to use trucking and rail to move diverted cargo to ultimate destinations is adding to supply chain costs.

The building chaos is occurring with no signs that the International Longshoremen’s Association and United States Maritime Alliance are back at the negotiating table in an attempt to work through significant differences on wage increase levels and use of port automation, despite consistent efforts by the Biden administration to get the parties back into collective bargaining.

In the mad dash to unload as many containers as possible for clients, ocean carriers moved containers off at alternative ports, but according to Vizion, which tracks container movements, roughly 2,000 shipments may have been dropped at a port that was not their intended destination.

Paul Brashier, vice president of global logistics at ITS Logistics, told CNBC he has clients who were notified their containers were at alternative ports as a result of the container dumping.

“These diversion dropoffs inflate the inland transportation cost,” said Brashier. “Trucking companies get paid for a round trip where the truck driver needs to pick up and drop off the containers at the same port. The diversions are adding to transportation costs because of the additional mileage.” 

“Pre-strike and post-strike out-of-network container diversions are already driving up shipping costs,” Brashier said. “In most cases, little warning was given by the ocean carriers, which left many shippers scrambling to procure last-minute trucking capacity in congested ports they do not have familiarity with.”

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