Fitch Ratings said a potential strike or some form of work slowdown affecting West Coast ports resulting from a contract impasse between dock workers and terminal operators is likely to be short and manageable.
The contract between the International Longshore and Warehouse Union and the Pacific Maritime Association expired at midnight, but those close to the talks and industry observers say there has been little acrimony so far. They expect leaders of both sides to extend the contract a few weeks until they can agree on a new multi-year deal. The contract covers 29 ports that handle 20 million TEU per year.
A 2002 lockout was short — 10 days — but also damaging to the economy. The lockout prompted shippers to permanently move some cargo through other ports to hedge their supply chain risk against future disruptions.
According to the ratings agency, an impasse would have limited financial impact on ports such as Los Angeles and Long Beach because of their close ties with terminal operators and their substantial liquidity reserves. The two largest container ports have more than 600 days of cash on hand and minimum annual throughput guarantees from terminal operators representing more than 70 percent of operating revenues.
Many shippers have already made contingency plans to import goods from Asia earlier than normal or use other ports in case the labor situation results in a shutdown of port activity.
A University of Maryland study sponsored by the National Retail Federation and the National Association of Manufacturers estimates that a five-day strike would cost about $2 billion a day, with the daily economic cost rising to $2.5 billion if the shutdown stretches 20 days.
Fitch: SoCal ports can withstand short labor disruption
