J Mintzmyer, founder and chief analyst of Value Investor’s Edge, is a well-known shipping analyst. In his latest interview, he warned that the US West terminal strike crisis is threatening to rise and that shipping rates will “blow through the roof” this year if not handled properly.
Zero Hedge 7 reported that Mintzmyer said in an interview with Fringe Finance that the big problem facing the supply chain this year is that the International Longshore and Warehouse Union (ILWU), which represents U.S. West terminal workers, is about to renew a contract that expires at the end of June. The contract was extended for three years in mid-2009, when industry market conditions were far weaker than they are today. Now that the labor side has significant bargaining power, it may be able to compete for more favorable terms.
Mintzmyer warns that if there is no consensus between the two sides and workers go on strike or the port is closed, then congestion could worsen and shipping rates could go through the roof.
Mintzmyer says it’s really hard to predict, as labor negotiations are never easy, but the industry may privately work out a “sweetheart deal” with unions, or offer favorable extensions until conditions recover. Mintzmyer said that while the union may be able to negotiate a “sweetheart deal” with the union, it may offer favorable extensions until things return to normal.
Mintzmyer said that while the U.S. Infrastructure Act does allocate a lot of money for port construction, it will take years for these mega-projects to get underway, and he believes that the benefits will not be realized until 2023-2024.
Mintzmyer pointed out that the global policy on new coronary pneumonia (COVID-19) is a major factor in the chaotic supply chain. He said the end of 2019 market conditions have been quite tight, the U.S. ports (especially the West Coast) are facing 10 years of underinvestment dilemma, large-scale closure disruptions, disrupting the overall operation.
Mintzmyer said the easing of restrictions is working, but the system is basically broken, and even the most optimistic scenario will take months to mitigate.