U.S. firms that depend on East and Gulf Coast ports have imported early, moved goods to the West Coast and even put cargo on expensive flights to hedge against an upcoming strike on Oct. 1, which could disrupt supply chains and ignite inflation in advance of the U.S. Presidential election.

This is just one more headache for us after all the other problems we have been facing," said Kenneth Sanchez. Chesapeake Specialty Products sends out metallic abrasives, foundry sand, and additives that are used in engine blocks and transmissions around the globe.

Baltimore is his main port. It's one of the three dozen ports covered by a contract that expires between the International Longshoremen's Association, a union representing 45,000 workers in the port, and the United States Maritime Alliance, an employer group. Renewal talks have reached stalemate over pay.

The walkout is just five weeks away from a presidential race between Democratic Vice-President Kamala Harris, and Republican Former President Donald Trump. This election will likely be decided by issues of finances.

The U.S. jobs market could be hit by a prolonged strike next month, at a crucial time. This would coincide with a strike of 30,000 Boeing machinists, which has already begun to spread through its supplier network. Oxford Economics economists estimated last week that the two labor actions combined could result in a reduction of 100,000 jobs in payroll growth if they continue into mid-October. Sanchez would suffer a second major supply chain failure after a collapsed bridge cut off access to the Baltimore Port from late March until mid-June.

He said that "things were just beginning to get back into normalcy." He is now working on a plan that would put shipments onto trains for West Coast ports, should ILA members strike. These ports stretch from Maine to Texas. They handle approximately half of the U.S. Ocean trade.

STIHL, a German chainsaw manufacturer, said that it was also developing contingency planning to keep exports flowing out of its factory near Port of Virginia. However, they did not elaborate. STIHL's U.S. factory ships to more than 80 countries.

Retailers, manufacturers, and other importers have rushed in clothing, home goods and machine parts ahead of the deadline for the strike to avoid cargo being stuck.

This sent U.S. exports to multi-year-highs in July and Augurary - exacerbating an increase in shipping prices tied to the rerouting of vessels around Africa to prevent rebel attacks on ships close to the Suez Canal trade shortcut.

Ronnie Robinson is the chief supply chain officer of DSW's parent company Designer Brands. He routes around 20% of DSW's imported shoes through the East Coast. About half of these goods were moved to the West Coast. He paid ten-times more for a small shipment from Brazil of leather dress shoes and boots than the typical ocean transit.

People will pay anything to be at the front of the line, said Robinson. He added that his company could not risk delivering late to clients such as Macy's Nordstrom, Dillard's and Dillard's.

Robinson still has between 10,000 and 20,000 units on ships bound for the East Coast "that we are worried about".

CARGO STRANDED, SOARING RATE

According to S&P Global’s maritime tracking service Seaweb, as of Saturday, 42 container ships were scheduled to arrive in the Port of New York & New Jersey, which is one of the largest ports affected by the labor dispute. Thirteen ships are due to arrive after September 30.

John McCown is a senior fellow at Center for Maritime Strategy. He says that in August, the five biggest ports along the East and Gulf Coasts processed 24,766 containers 40 feet long of imports or exports worth $2.7 billion per day.

Wine and auto parts imported from Europe can be vulnerable. Logistics experts say that rerouting these goods to the West Coast can be difficult because it may require a transit via the Panama Canal or air freight, or other costly or time-consuming measures.

According to Jason Miller of Michigan State University, the department of supply management's interim chair, the ports on the East Coast and Gulf Coasts handle about 75% of bananas entering the United States. According to Miller, it is not economically viable to fly or reroute such low-value items.

In July, the cost of shipping a 40-foot box from Shanghai to New York increased to about $10,000. Since then, rates have declined but could rise again if there is a strike.

Sanchez from Chesapeake said: "If shipping costs go up, it's passed on to the consumer. Whether they're buying a car in a dealership or a metal component at a hardware shop." Reporting by Lisa Baertlein, Los Angeles; Tim Aeppel, Dan Burns and Anna Driver in New York. Editing by Richard Valdmanis & Anna Driver.

(source: Reuters)