West Coast seaports and several freight projects that handle port-related cargo may have their financial ratings downgraded if dockworkers go on strike.
Contract negotiations between 29 West Coast seaports and the 10,500 members of the International Longshore and Warehouse Union (ILWU) are still ongoing, but the ILWU's contract with the ports expired July 1 and discussions remain tense, according to sources.
Those 29 ports on the West Coast handle some $300 billion in trade annually, so a strike could be crippling. New York-based bond firm Fitch Ratings warned that the potential for a work stoppage is causing negative credit pressure.
Fitch said port strikes in the past have lasted between 80 to 100 days and have had a material financial impact on the economy. So far, Fitch said its ratings for the five West Coast seaports it covers should remain stable unless a work stoppage continues long-term.
However, if there is a long-term work stoppage, there could be negative financial fallout. Businesses could opt to route goods through ports in Mexico and Canada or truck goods to other U.S. ports, Fitch said. Also, although most port revenues are based on long-term fixed contracts, these contracts might include 'work interruption' clauses, so shippers could move their freight to other transport options, Fitch added.
Fitch pointed out that related transport facilities, such as the new Alameda Corridor, may have their credit rating affected if there is a port strike. The Corridor consists of a 20-mile, multi-track rail corridor linking the ports of Long Beach and Los Angeles with the Los Angeles central rail yards.
Although the project has strong financial reserves, revenues are primarily derived from railroad user fees and container charges, so a strike could affect the project's financial performance, said Fitch.