Longshoremen's strike halts trade at the Port of Newark and impacts the supply chain ecosystem

Every workday, Sean Murphy enjoys the hectic atmosphere of the busiest port on the East Coast on his early morning drive to his job as a warehouse manager in northern New Jersey.

Towering cranes lift shipping containers from ships from around the world newly arrived in Newark. Mile-long freight trains transport cargo to and from the docks. Belching trucks rattle along the highway, transporting containers to distribution centers from Maine to Florida.

Not on Tuesday. When 45,000 longshoremen went on strike, closing most of Newark and three dozen other shipping terminals on the Gulf and East Coasts, Mr. Murphy was faced with the spectacle of a bustling industrial center now largely out of business.

This was a visual summary of the challenge facing the global economy: freight is on hold, trade is frozen and there is no clarity as to when normality will return.

“It was eerie, like a ghost town,” Mr. Murphy said. “It was really scary, if I can be honest. It was dead quiet. I’ve never seen that in my entire life.”

Beyond the atmosphere, the virtual closure of Newark and other major ports threatens the livelihoods of millions of people who work near the affected docks — and of companies that rely on the flow of exports and imports.

Mr. Murphy's employer, Flexport, manages shipping and trucking for major brands in industries such as apparel, electronics, furniture and building materials. Normally this means that the containers are picked fresh from the ships, the contents are sorted on the shiny concrete floor and the goods are then sent by truck to warehouses and shops.

But the strike has halted the flow of containers at the port complex in northern New Jersey, leaving Mr. Murphy wondering how much cargo was still in transit.

The previous week, his warehouse received three times its usual cargo volume as customers rushed to complete their deliveries ahead of the strike. On Tuesday, trucks continued to deliver cargo that had arrived at the port the previous day while dockworkers were still working.

“Right now we are not seeing the impact of the strike,” Murphy said. But he had no idea how long that would take.

There was a striking silence at a rest stop around the corner, where there would normally be many vehicles queuing to refuel. Most regular customers are truck drivers who transport containers between the docks and nearby warehouses.

“It’s dead,” said Isthian Thomas, who worked the cash register, estimating that business is down 80 percent. The shipping terminals were closed, so no ships docked to unload, he said. No ships meant no containers, which meant tight work for truck drivers.

Mr. Thomas and a fellow cashier, James Lore, generally supported the longshoremen's goals. Their work is strenuous and dangerous, and the shipping companies have made hundreds of billions of dollars in profits. The workers deserved their share of the action, the two men said.

They exuded a sense of solidarity with dockworkers, especially after the pandemic when they all worked together despite the threat of Covid.

“We were suddenly 'essential workers,'” Mr. Lore said. “Before we were just stupid gas jockeys.”

He expressed particular sympathy for the union's opposition to further automation at the ports – not only because it threatens wages, he said, but also because it limits overall economic activity.

“The robots don’t pay taxes,” Mr. Lore said.

But the few truck drivers in attendance tended to be critical of the longshoremen, accusing them of jeopardizing many of their paychecks by seeking pay increases of more than 60 percent over the next six years.

“That's not realistic in this economy,” said Joseph Green, a truck driver who was heading to Massachusetts, pulling a container he picked up from the port on Monday. After that, he expected to be unemployed. “I’m going to come back empty and wait for these guys to finish negotiating,” he said.

As is common in ports across the country, truck drivers in Newark express their displeasure with longshoremen, describing them as true dockworker aristocrats. Dockers are denied access to toilets, drivers complain, even though they sometimes have to sit in their taxis for hours waiting to pick up containers.

It's not lost on drivers that they are only paid per load – meaning the time they wait is effectively unpaid – while longshoremen are paid hourly wages, limiting their incentive to move faster.

“You have this flippant attitude,” Mr. Green complained. “They don’t care.”

The traditional tension between truck drivers and dock workers underscores the strange dynamics of the strike.

Longshoremen's union, the International Longshoremen's Association, has tried to rally public support and persuade the Biden administration to stick to its position against intervening to end the strike by portraying its movement as a quest for justice.

“CORPORATE GREED VS WORKER RIGHTS” read the signs carried by picketers outside Newark’s port terminals. “NO WORK WITHOUT A FAIR CONTRACT.”

But the people feeling the heat most are other workers who are paid much less than longshoremen, whose wages — after accounting for overtime — often reach $200,000 a year. Truck drivers are rarely unionized and often work as independent contractors with minimal job security.

The port workers want to use the strike to make life unpleasant for the port operators – international shipping companies owned by foreigners. But airlines may be in a unique position to actually benefit from the strike: They have canceled service to some East and Gulf Coast destinations, leading to reduced capacity and therefore higher shipping prices worldwide.

Shipping experts say this is a pattern that shipping companies have mastered recently – first during the pandemic's supply chain disruptions and more recently when Houthi rebels aimed missiles at ships in the Red Sea, turning the Suez Canal into a virtual one No-go zone.

“Recent supply chain disruptions, such as Covid-19 and the Red Sea attacks, led to a reduction in ocean freight capacity and a dramatic short-term increase in prices,” said Daniel B. Maffei, chairman of the Federal Maritime Commission, which regulates ocean freight. “A work stoppage by the ILA would be no exception. The large ocean freight companies could actually generate more revenue at times than they miss out on.”

Mr. Maffei said he was worried the strike could last longer than many expected because neither side had a strong incentive to compromise. The union believes it has strong leverage to push for better wages, he said, while employers could use the strike as an opportunity to raise prices.

Late Tuesday, the Biden administration set its sights on one way shipping companies could boost their revenue: through surcharges that many impose on shipments at ports disrupted by the strike.

“Our government is calling on shipping companies to withdraw their surcharges,” Transportation Secretary Pete Buttigieg said in a written statement. “No one should exploit a disruption for profit, especially at a time when entire regions of the country are recovering from Hurricane Helene.”

Most industry experts believe economic disruption will be minimal if the strike is resolved within a few days. Companies that rely on the shipping industry have been anticipating the strike for months, diverting cargo to West Coast ports while storing extra product in warehouses.

“Our customers typically have two months’ worth of additional inventory on hand,” said Ryan Petersen, CEO of Flexport.

However, if the strike lasts longer than a week or two, the replacement plans are likely to be exhausted. West Coast ports could be overwhelmed, as they have been during the pandemic.

Some cargo may be diverted to ports in Mexico and Canada. But port workers in Montreal are on strike for three days, and Mexico's ports are generally smaller operations. Cross-border rail and truck connections could quickly become overwhelmed by an increase in additional freight.

“There aren’t many good alternatives,” said Judah Levine, director of research at Freightos, an online container booking platform.

All of this explained why Mr. Murphy had trouble imagining what lay ahead at the Flexport warehouse near the Port of Newark.

Industrial windows shipped from India filled one end of the cavernous room. At the opposite end were boxes of electronics from a factory in Taiwan, alongside boxes of clothing made in Brazil, toys from China and men's grooming products from the UK.

Mr Murphy was waiting for trucks that would deliver four more containers on Tuesday afternoon.

And then?

“We just don’t know,” Mr. Murphy said. “We are in uncharted waters.”