The recent resolution of a U.S. port workers' strike has led to notable declines in global shipping stocks. On Friday, shares of major shipping companies fell sharply in response to the unexpected end to the labor dispute, which had earlier raised the possibility of increased freight rates amid disrupted supply chains.

The International Longshoremen's Association and the United States Maritime Alliance reached a tentative agreement, extending the dockworkers' contract through January 2025. This extension temporarily resolves the dispute that halted operations at U.S. ports, which handle more than two-thirds of the country's imports, and dispelled expectations of prolonged supply chain disruptions that could have spiked freight charges.

Danish shipping giant A.P. Moller-Maersk saw its shares drop by over 7% in early trading, while Germany's Hapag-Lloyd experienced a significant fall of nearly 12.4%. This decline was mirrored in Asia, where Taiwan's Evergreen Marine, Wan Hai Lines, and Yang Ming Marine suffered losses between 8.8% and 10%. Japanese shipping giants Nippon Yusen, Kawasaki Kisen, and Mitsui OSK Lines also posted declines between 7% and 9%.

Investors had banked on a temporary surge in freight rates if the strike had persisted. However, with the labor dispute’s swift resolution, normal port operations are expected to resume, dashing those hopes and causing a widespread sell-off in the sector. Freight rates have struggled under pressure from excess shipping capacity and easing demand, and the premature end of the strike exacerbated market uncertainties.

The tentative agreement includes a substantial 62% wage increase over six years, a figure slightly below what union members initially demanded. Both cargo owners and shipping lines are expected to share the burden of these higher wage costs. Despite the brief nature of the strike, it disrupted U.S. supply chains significantly, holding up billions of dollars' worth of goods at ports.

The swift settlement offers some relief to the shipping industry as stakeholders now focus on long-term negotiations aimed at addressing broader contractual issues. Nonetheless, the resolution still leaves the industry grappling with ongoing challenges posed by a weak freight market, generating uncertainty regarding shipping stocks' outlook in the near future.