By PortalPortuario Editorial Staff
@PortalPortuario
The threatened strike at US East and Gulf Coast ports may cause importers to accelerate their efforts to protect maritime supply chains in a vicious cycle of disruption to container shipping, which would make them fall into a vicious circle, according to Xeneta.
At the beginning of this week, it is worth remembering, the International Longshoremen’s Association (ILA) announced that it has suspended negotiations with the United States Maritime Alliance (USMX) on a new labor contract for port workers on the United States East Coast and Gulf Coast. The existing agreement will expire on September 30.
The reason for the suspension by the dockers is what they consider a threat; that is, the implementation of automation solutions, which they have already detected in some terminals linked to APM Terminals, which they have directly targeted to put their jobs at risk.
“Timing is everything when negotiating and the ILA announcement could not have come at a worse time for shippers,” he said. Peter Sand, chief analyst at Xeneta.
“We have already seen shippers bring forward imports ahead of the traditional peak season in the third quarter due to concerns about the continued impacts of the Red Sea conflict on the supply chain. “They could now accelerate this approach if there is an increased risk of major disruptions along the US East and Gulf coasts later this year.”
“However, the frontloading of imports is part of a toxic cocktail of factors that has caused severe port congestion in Asia and Europe and dramatic increases of more than $2,000 per FEU in container shipping spot rates. It seems that importers are trapped in a vicious cycle where any measures they take to protect their supply chains can make the situation worse,” he added.
The latest data from Xeneta, the ocean freight rate intelligence and benchmarking platform, shows that average spot rates from the Far East to the US East Coast have increased 64% since April 30 to 6,820 dollars per FEU on June 11.
In the first four months of this year, 2.44 million 20-foot equivalent ocean containers (TEU) arrived in the United States from the Far East through ports on the East and Gulf coasts. This represents more than 40% of total container imports from the Far East to the US.
Sand said that “if shippers believe there will be significant disruption on the US East Coast, they may consider importing to the US West Coast, unlike what we saw during the Covid-19 pandemic. Shippers will take a close look at the data before taking this leap of faith, because higher volumes imported to the US West Coast – or alternatives like Vancouver – will tighten capacity and see rates rise. This includes importing into Mexico, where the market has already seen massive increases in imports from the Far East in the last 12 months.”
Forward-looking data from compared to the 19% increase seen on May 1.
However, Sand believes potential disruption at US East Coast and Gulf Coast ports could cause spot rates to remain elevated for longer.
“If the collapse of union negotiations causes more shippers to accelerate imports and bring in Christmas goods early, then we could see spot markets remain high. “We haven’t seen strikes on the East Coast of the United States in decades, but the ILA’s rhetoric has been particularly fierce, so we shouldn’t be surprised that negotiations have failed,” he explained.
“Shippers with good risk management and supply chain data may have planned for this situation and that is perhaps one of the reasons why we have already seen an anticipation of imports before the peak season. The strikes on the US East and Gulf Coast are the least surprising of all the supply chain disruptions this year. There is no ideal solution and shippers will be hoping for an outcome similar to last year’s labor negotiations in the west coast, where an agreement was finally reached after extremely difficult negotiations and operational difficulties. “If an agreement cannot be reached and strikes are carried out when shipping container networks are still under extreme pressure, the end of 2024 could be enormously difficult,” he concluded.
