A port strike would be ill-timed, but disruption could boost these companies

By James Rogers

A prolonged outage could boost a sagging freight market, says J.P. Morgan analyst Brian Ossenbeck

The looming strike at U.S. East Coast and Gulf ports would be ill-timed for the holiday season and could also cause a spike in rail congestion, according to shipping executive Stamatis Tsantanis. However, analysts say the disruption could spell opportunities for some companies.

The port lockdown is edging closer to reality, with the current contract between the International Longshoremen's Association and the United States Maritime Alliance set to expire on Sept. 30.

"This is the worst possible time for a port strike since it will potentially affect the Christmas shopping season, because there might be shortages or things may not arrive in time," Tsantanis, the CEO of shipping companies Seanergy Maritime Holdings Corp. (SHIP) and United Maritime Corp. (USEA), said in a statement. "I'm not saying kids will not have toys for Christmas but it can seriously affect goods coming into the U.S."

Related: A port strike could be an economic 'tsunami' affecting these sectors

Rerouting shipping to West Coast ports is also raising concerns over the potential for rail congestion as those ports see an increase in containers, according to Tsantanis. "Rail dwells and chassis shortages could become an issue during the next two months if Southern California's already busy docks continue to receive extra volume because of a potential port strike over the East and Gulf coasts and rail disruption in Canada," he said.

However, major railroad operators that cover the Western U.S. have seen a container boost ahead of the possible strike, according to Susquehanna Financial Group. Both Union Pacific Corp. (UNP) and BNSF have benefited from the West Coast container surge as shippers got ahead of a possible East Coast port strike, Susquehanna Financial Group analyst Bascome Majors wrote in a note released Thursday.

J.P. Morgan estimates that shutting down East Coast and Gulf ports would have an economic impact of $3.8 billion to $4.5 billion per day, although some of that would be recovered over time after a return to normal operations.

Related: Why this holiday season, shoppers might finally be ready to buy fancier stuff

A prolonged outage could actually boost a sagging freight market, according to J.P. Morgan analyst Brian Ossenbeck. "Recent freight recessions have ended suddenly when a disruption shocked the market, including deep freezes in Texas, multiple hurricanes, and regulatory changes," he wrote. A potential ILA strike could be a catalyst to end "the current malaise," according to the analyst, particularly if it lasts long enough to create time-sensitive demand in the traditional fourth-quarter seasonal peak. This would boost freight rates for carriers that own their own equipment, such as Knight-Swift Transportation Holdings Inc. (KNX) and J.B. Hunt Transport Services Inc. (JBHT), Ossenbeck said.

A shorter disruption would still likely boost the need for expedited surface and air freight, to the benefit of RXO Inc. (RXO), C.H. Robinson Worldwide Inc. (CHRW) and Expediters International of Washington Inc. (EXPD), the analyst added.

-James Rogers

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09-28-24 0854ET

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