Q&A: How a U.S. Port Strike Could Impact Automotive Supply Chains

Q: Which ports would be impacted by the strike?

A U.S. port strike would shut down 36 ports along the East and Gulf Coasts which include 5 of the 10 busiest ports in North America. Auto companies and suppliers would be impacted not only in the U.S., but also across Europe, Oceania, Latin America, and Asia.

Q: What is the impact on the automotive industry?

The U.S. is one of the largest importers of auto vehicles, parts, and accessories. So far this year, the U.S. East Coast alone has handled over 300,000 TEUs and 17,000 LCL shipments of auto parts and/or automobiles from OEMs and Tier 1 suppliers. 50-60% of that volume originated from Europe and India, with the remainder originating from the APAC region. While the APAC region typically has more options to shift freight to the West Coast, over half of the automotive freight coming in today is heavily dependent on the East Coast. For example, the Germany to Charleston and Savannah corridor is crucial for European automakers which would be shut down in the event of a strike. Currently, there are only two container service loops operating between Europe and the U.S. West Coast.

Many ocean carriers historically wait out strikes. And with 57% of U.S. containers being disrupted in the event of a strike, that's a lot of freight halting ships that should be on their way to Europe, India, etc. And if a ship is five-days late getting to Port B in Europe, that means the containers that are ready to go at Port B are now sitting five-days longer, not only delaying future production but also adding congestion to that port which can lead to backlogs and equipment shortages.

Q: What shifts should we expect in freight flow?

Despite early ordering by other industries to get ahead of disruption, some shippers are proactively shifting volume to the West Coast. Although only a small amount currently, this is expected to grow as we get closer to the potential strike date. Increased volume on the West Coast will require rail and trucking to respond, further shifting the flow of freight and potentially affecting inland moves on the East and Gulf Coasts when the ports reopen.

Auto companies and suppliers are at a greater risk if the ports close since they operate on a lean inventory model and therefore don't have a backlog of freight to pull from. This amplifies the need for other areas of the supply chain, like inland transportation, to run smoothly since they can't afford additional delays. Ahead of the strike, we've already seen a carrier respond by canceling all rail bookings with an estimated arrival date at port close to Oct. 1. The general rule of thumb is a week of disruption leads to a month of delays at the ports, but as you move inland your delays and recovery time increase. Historically, rail in particular takes more time to bounce back from disruptions, as we've seen with the latest Canadian rail strike.

Q: What options should I consider?

Since many auto companies and suppliers couldn't import early, air freight may become a necessary alternative to mitigate the impact of port closures. Keep in mind, it's the end of the summer travel season and retail peak season is ongoing, so finding capacity on the transatlantic may be more difficult. As we've done in the past for auto customers, air charters are a solution to consider based on production needs.

Transloading is another option for moving critical freight quicker, as it avoids the 2-7 day wait you typically see when loading containers at the port to connect with rail service. Especially since that wait time would likely increase as port congestion increases. With transloading, your freight can be on its way the same or next day. Advanced planning with your forwarder is essential to take advantage of this option.

Because strikes can be unpredictable, it's crucial to watch volume shifts closely and respond quickly. For example, if a strike occurs and everyone shifts to the U.S. West Coast, look at how Canada's ports are doing. Is air freight or transloading the best option based on the company's goals? These are topics we're working with customers on now so we can execute quickly as the market fluctuates. Strong but flexible contingency plans and continuous communication leading up and during the potential U.S. port strike will be key to minimize the impact on automotive supply chains.