The International Longshoremen’s Association (ILA) has warned that its 85,000 members will strike on 1 October if a new contract is not agreed ahead of that date.
“With a port-to-port sailing time of 24 days on a typical transatlantic trade from Genoa to Savannah, plus around 10 days land operations at either end, shippers must act now if they wish to utilise alternative supply chain options,” warned a Xeneta briefing.
Transpacific shippers have already missed the boat, “With port-to-port sailing times of 50 days between Shanghai and New York, plus land operations, there are already containers on the ocean which will arrive on the US East Coast after 30 September – deal or no deal,” said Xeneta.
Shipper expectations that rates would collapse with the flood of newbuilding’s expected this year were dashed by the Middle East conflict and the absorption of much of the new tonnage into diverted Asia to Europe services, which now take the far longer route around the Cape of Good Hope.
Disruption of supply chains caused by the effective closure of the Suez Canal have diminished as additional tonnage was injected, but shippers according to both Xeneta and Drewry Shipping Consultants have brought forward much of their Christmas shopping, traditionally saved for Q3, to avoid the rush.
Drewry’s WCI Index is now showing a decline in global rates which Drewry analyst Simon Heaney said is an indication that barring any unexpected events could mean a slow decline in rates for the rest of the year.
On 15 August the WCI was down 2% at $5,428 per teu compared to a week earlier. The index 48% below the previous pandemic peak of $10,377 in September 2021, but it is 282% more than the average 2019 (pre-pandemic) rate of $1,420.
“Spot will decline as the market has adjusted to the new capacity, but we will need to see what happens to demand,” said Heaney who added, “We are hearing from shippers that carriers are touting for cargo now.”
After several weeks of decline the Shanghai Containerized Freight Index (SCFI) moved up marginally on Friday increasing to 3281.36 points up 27.46 points over the previous week.
An US East Coast strike could be the next spanner in supply chains with the deadline for contract negotiations 30 September and strike action already planned for 1 October.
US market consultant Jon Monroe said today: “As we approach the contract expiration, there are still no clear conclusions in the ongoing negotiations.”
Analysts Sea-Intelligence estimated that US East Coast ports would handle 2.3 million teu in October, which would equate to an impact of 74,000 teu per day if dockworkers were to strike.
Heaney also believes that USEC industrial action would “have an impact for sure, particularly on transpacific cargo, with increased flows into West Coast ports to counter the loss of East Coast capacity.”
Whether the East Coast disruption is realised remains to be seen, but with no further disruptions Heaney expects spot rates on the major trades out of Asia to Europe and the US to fall, with more capacity expected to be delivered during the rest of this year.
“Spot rates are trickling down slowly, but they are still very elevated compared to the start of the year,” said Heaney, “Overall rates, contract and spot, are high and as the market adjusts to new capacity, we will need to see what demand looks like.”
Source: Sea Trade Maritime
