Supply Chain Matters provides an update to our previous alert regarding a labor strike that occurring in the port of Hong Kong, the third busiest ocean container port in the world. Last week we alerted procurement and supply chain teams to exercise their disruption scenario plans regarding the real threat of additional delays for inventories that are scheduled for transit utilizing the port.

Media reports this week indicate that the nearly 500 striking dock workers continue to disrupt port operations. Talks were supposed to resume yesterday. A published report by Reuters quotes the Hong Kong Association of Freight Forwarding and Logistics as estimating that 120,000 twenty-foot equivalent (TEU) containers are now stacked up as the strike enters its 14th day. Reports from local media continue to indicate port delays of up to 60 hours.  Container shipping lines such as Evergreen Marine and Mitsui OSK Lines are either diverting vessels or skipping the port of Hong Kong altogether.

Readers within Hong Kong or directly managing Asian based ocean shipping can perhaps update the on-the-ground situation in the Comments section below this posting.

This strike has taken on social labor rights implications.  Hong Kong’s richest man, billionaire Li Ka-shing controls the majority of the Port of Hong Kong through the entity of Hongkong International Terminals Ltd., along with other global port facilities through the broader Hutchison Whampoa Ltd. name. Terminals backed by Hutchinson have a reported 46 percent share in the Port of Shenzhen, helping to recoup any operating losses incurred in Hong Kong. Thus, according to shipping analysts, Li has little to lose in the ongoing disruption. Some are speculating as to whether this is a one-time disruption or an overall structural change in shipping movements in the months to come.

The roughly 500 striking dock workers, who are seeking a 20 percent hike in wages, claim that they have not had a pay raise in 10 years as the cost of living has soared within Hong Kong.  They further claim difficult working conditions that do not include any bathroom breaks. The strike is reported as hitting a nerve in the city state, where the growing wealth gap has caused turmoil in the local government.

By our view, one thing seems to clear, and that is that supply chain teams should anticipate additional shipping delays involving ocean containers out of China’s coastal regions. That will more than likely have inventory impacts, and teams need to assess their fulfillment plans for the early and late summer periods. Since some goods route through Hong Kong for certain tax purposes, there may be additional financial implications as well.

Bob Ferrari