AND SO it begins. The International Longshoremen’s Association, representing dockworkers at US east and Gulf coast ports, went on strike at 12:01am on Tuesday, the first strike by the ILA since 1977.

The United States Maritime Alliance (USMX) said late Monday that it had traded counter-offers with the ILA over the past 24 hours, and that it had offered a wage increase of nearly 50%, triple employer contributions to employee retirement plans, strengthened health care options, and the continuation of “current language around automation and semi-automation”.

The union rejected the offer and is taking a page from the populist political playbook to press its case, stressing “America first”, anti-foreigner rhetoric.

“It’s disgraceful that most of these foreign-owned shipping companies are engaged in a ‘make and take’ operation,” said the union. “They want to make their billion-dollar profits at United States ports, off the backs of American ILA longshore workers, and take those earnings out of this country and into the pockets of foreign conglomerates.”

ILA president Harold Daggett said in a Facebook post on Monday that the shipping lines are “greedy bastard corporations overseas — all they want is money, money, money — and they don’t give a shit about us.”

False claims on rate hike

In another parallel to populist politics, the ILA is spreading fake news, not about Haitian immigrants eating Americans’ cats and dogs, as with Republican presidential nominee Donald Trump (who has a “long relationship…going back decades” with Daggett, according to the ILA), but about shipping rates.

The union stated in a press release on Monday that foreign carriers “are now charging $30,000 for a full container, a whopping increase from $6,000 just a few weeks ago. In just a short time, they went from $6,000 to $18,000, then $24,000 and now $30,000. It’s unheard of and they are doubling their $30,000 fee, stuffing the same container from multiple shippers. They are killing their customers.”

ILA president Harold Daggett claimed in a Facebook post that the shipping lines “sometimes put two customers in that one container, so they get $60,000”.

Fact check: Container shipping rates are falling, not rising — and they are nowhere even close to $30,000 per feu on average, let alone $60,000. The strike is eventually expected to increase shipping rates, but only after queues tie up vessels and equipment.

Vespucci Maritime chief executive Lars Jensen said in an online post regarding the ILA’s rate claim: “It is wildly misleading and dishonest as an indication of actual general freight rates.”

Michael Kaasner Kristiansen, owner of shipping consultancy CK Americas, went further, calling the ILA “liars” in an online post. “It would be crazy to assume that ILA leadership does not clearly understand that shipping lines are not getting $30,000 for boxes going to ILA ports,” he wrote. The ILA refused all press inquires on Monday so Lloyd’s List was unable to seek a response.

Most cargo to US east and Gulf coast ports moves under contract, and contract rates are currently well below spot rates. According to Xeneta, rates on contracts signed in the past three months for shipments from Asia to the US east coast averaged $3,872 per feu as of Monday.

As for spot rates, Drewry’s World Container Index (WCI) put the Shanghai-New York average at $6,028 per feu in the week ending September 26, down 37% since July 18 to the lowest level since mid-May. The premium of the WCI east coast index to its west coast index, which is typically around $1,000 per feu, plunged to just $538 per feu last week, indicating a lack of demand to the east coast.

The Shanghai Containerized Freight Index (SCFI) assessed average spot rates from Shanghai to the US east coast at $5,626 per feu in the week ending September 27. This index is down 43% from its recent high on July 5, to the lowest level since the beginning of May. The SCFI put the east coast premium versus the west coast rate at $774 per feu last week. It was quadruple that level in early August.

Actual rates are even lower than those implied by indexes, according to Nerijus Poskus, head of ocean freight at digital freight forwarder Flexport.

“The current ocean market continues softening, and we’re still seeing opportunities for special spot deals to both the east and west coasts that can be significantly lower than the indexes suggest — sometimes even thousands less on select sailings and select origins,” he told Lloyd’s List on Monday. “There is a large gap between the cheapest carrier and a market average today, and there’s no one-size-fits-all approach for shippers.

“It’s also important to note that everything could change very quickly if the strike escalates and lasts longer than a few days,” Poskus added.

How the strike could play out

One reason spot rates are falling is that US importers were very aware of the October 1 strike deadline and preemptively brought in cargo early this year, accelerating peak season shipments. They also shifted more cargo to the west coast.

These preemptive moves will offset some of the economic fallout from the strike. “There is ‘breathing room’, as a work stoppage [comes] just as the post-peak season lull takes effect,” said Jefferies analyst Omar Nokta in a client note last week. Lower demand “is creating enough slack for Asia-US east coast rates to fall”.

The Wall Street Journal cited a source as saying the Biden administration believes US supply chains are resilient and that the economy could handle a short strike of up to a week in duration.

If the strike lasts longer, many analysts expect that the Biden administration will have no choice but to invoke the Taft-Hartley Act, forcing a 90-day cooling off period, even though president Joe Biden has explicitly stated that he will not.

Daggett gave his view of how the strike will play out in a video interview posted earlier this month.

“When my men hit the streets from Maine to Texas, every single port will lock down. You know what’s going to happen? I’ll tell you. First week, it’ll be all over the news. Every night. Boom, boom.

“Second week, guys who sell cars can’t sell cars because the cars ain’t coming off the ship. They get laid off.

“Third week, malls start closing down. They can’t get the goods from China. They can’t sell clothes. Everything in the United States comes on a ship. They go out of business. Construction workers get laid off because the materials aren’t coming in. The steel is not coming in. The lumber’s not coming in. They lose their jobs.

“Then everybody’s hating the longshoremen because now they realise how important our jobs are. Now I have the President screaming at me: ‘I’m putting the Taft-Hartley on you.’

“Go ahead. Taft-Hartley means I have to go back to work for 90 days as a cooling-off period. Do you think that when I go back for 90 days, those men are going back to work on that pier? It’s going to cost the [terminal] companies money to pay their salaries while they go from 30 moves an hour to maybe eight. They’re going to be like this,” said Daggett, putting his hands around his own throat.

“Who’s going to win here? Let’s get a contract and let’s move on with this world. Because in today’s world, I will cripple you. I will cripple you. And you have no idea what that means. Nobody does.”