By Doyinsola Oladipo and David Shepardson
(Reuters) – U.S. East Coast and Gulf Coast ports reopened on Friday after dock workers and port operators reached a wage agreement to settle the industry’s biggest work stoppage in nearly half a century, but clearing a backlog of cargo will take time.
The strike ended sooner than investors expected, weakening shipping stocks as shipping rates were no longer expected to rise.
“The port strike ended fairly quickly, removing any significant downside risk to the economy this quarter,” said Ryan Sweet, chief US economist at Oxford Economics.
At least 54 container ships were lined up outside ports as the strike prevented unloading, according to Everstream Analytics, threatening shortages of anything from bananas to auto parts. More ships are sure to arrive.
Pricing platform Xeneta said it would likely take two to three weeks to restore the normal flow of goods.
“Remember, ships keep calling, so it’s not just a matter of dealing with ships already in line, but working harder to get through congestion before supply chains restart,” Zeneta senior analyst Peter Sand told Reuters.
The United States Maritime Alliance International Longshoremen’s Association and Port Operators (USMX) labor union announced the deal late Thursday. They agreed to raise wages by about 62% over six years, raising average wages to about $63 an hour from $39 an hour, the sources said.
The ILA began a strike of 45,000 port workers, the first major work stoppage since 1977, on Tuesday, affecting 36 ports from Maine to Texas. JPMorgan analysts estimate that the strike will cost the American economy about $5 billion per day.
The obstruction represents a headache for the administration of Democratic President Joe Biden before the presidential elections scheduled for November 5, in which Democratic Vice President Kamala Harris will compete with former Republican President Donald Trump. It threatened to lower US employment numbers in a report scheduled to be released shortly before Election Day.
The White House has put pressure on the USMX employer group to soften its contract offer to end the strike, with business trade groups warning of dire consequences if the strike continues.
Shares of shipping companies in Asia and Europe fell after the deal was announced.
For example, shipping group AP Moeller-Maersk’s stock was down 4.7% by Friday morning, while Hapag-Lloyd’s stock was down 14.4%. Japan’s Nippon Yusen stock, which hit a record high the day before, fell 9.4% and Kawasaki Kisen stock fell 9.7%.
“Shipping stocks had previously risen on expectations of higher prices as a result of the strike by American port workers and the tense situation in the Middle East,” said Tony Huang, an investment advisory analyst at Taixin Securities.
Retailers account for about half of all container shipping volume, with Walmart (NYSE:), IKEA,… Home Depot (NYSE:) is among those that rely on East Coast and Gulf Coast ports, according to eMarketer analyst Sky Canaves.
Bill of lading numbers released by Import Yeti, a data company, show that importers relying on the affected ports include IKEA, Walmart, and Goodyear Tire & Rubber.
Many retailers said they had stocked up early for the upcoming holiday shopping season, and that the short strike likely would not have a significant impact on product availability.
East Coast ports are also a destination for coffee, the price of which has risen due to the unrest.
The tentative agreement on wages ended the strike, but only extended the current contract until January 15. The two sides will continue to talk about other issues, such as the ports’ use of automation, which workers say will lead to job losses.
“The decision to end the current strike and allow the East Coast and Gulf ports to reopen is good news for the nation’s economy,” the National Retail Federation said in a statement. He added, “The sooner they reach a (final) agreement, the better it will be for all American families.”