Recently, it is predicted that in October, shipping rates in the West and East of the United States will rise by $4,000!
Recently, it was reported that after rising for more than three months, shipping prices have reached a turning point, and the United States West and the United States East have fallen. In this context, there is a sudden sound that freight rates are about to rise, what happened? Will there be big changes in the global supply chain?
The main reason for this increase in data is that on August 22, Asian shipping companies reported to the United States Federal Maritime Commission (FMC) that they planned to raise the freight rate of each 40-foot container (large box) on the West and East routes of the United States by $4,000 from October 1. It is reported that the increase is more than 50%. The main reason is the highly probable strike of American port workers on October 1.
Longshoremen at ports on the U.S. East Coast and Gulf Coast have contracts with port employers that expire at the end of September, and the International Longshoremen's Association has vowed to go on strike on October 1 if a new contract is not in place. However, because the new contract with the longshore union and the East Coast and Gulf Coast maritime employers to raise wages over the next six years of the nearly 80%, this industry analysis is highly unlikely to reach an agreement, meaning that the strike is likely to occur. In response to this forecast, there are already shipping companies and brands to respond.
It is reported that on August 22, Asian shipping companies reported to the United States Federal Maritime Commission (FMC) that they planned to raise the freight rate of each 40-foot container (large box) on the West and East routes of the United States by $4,000 from October 1. This increase, if calculated at current rates, will increase the freight rate of the US-West route by about 67%, and the US-East route by about 50%. Retailers such as Walmart and other importers are scrambling to get goods in before a union contract expires on Sept. 30. Some market voices predict that there may be subsequent shipping companies to adjust freight rates.
Could supply chain disruptions continue into 2025 and if the strike does take hold, will it only affect higher freight rates across the East and West? The broader crisis has disrupted global supply chains for months. Analysts at Sea-Intelligence, a Danish shipping consultancy, estimate that the backlog caused by a one-day strike could take four to six days to clear. If a week-long strike occurs in early October, the impact could last until mid-November before easing.
If the strike lasts two weeks, it could take until 2025 for port operations to fully return to normal. The company predicts that the throughput of ports on the East Coast of the United States will reach 2.3 million TEUs in October, with an average daily handling capacity of 74,000 TEUs, of which 36,000 TEUs are imported and 38,000 TEUs are exported. In particular, if a strike occurs, about 20,000 TEU of empty container loading per day will be blocked. Maersk may also have predicted the impact of the coming strike. It said that a total shutdown in the Gulf of Mexico and the East Coast of the United States, even if it lasts only a week, may take up to four to six weeks to return to normal operations, and during this time, a large amount of cargo and transportation delays will continue to accumulate, further increasing the pressure on the supply chain.
To this end, it claims to be ready and offers to actively assist customers in exploring alternative transportation routes, modes of transportation and distribution solutions to minimize the impact on customers' supply chains.
Port worker strikes are one of the major challenges facing the shipping industry, which often leads to disruption of port operations and backlog of cargo, which in turn affects the stability of the global supply chain. The predicted strike at ports along the US East Coast and Gulf Coast is not alone. Previous strikes at the ports of Los Angeles and Long Beach in California occurred in December 2012, and although most holiday shipments had already been processed, the port traffic was not at its peak, but even so, the loss was as high as $1 billion per day. In July 2023, longshoremen at the ports of Vancouver and Prince Rupert in Canada went on strike over a breakdown in labor contract negotiations, leading to a prolonged shutdown of the ports.
More than 20 ships lined up at the anchorage, and several shipping companies announced that they would skip port and extend their ship schedules indefinitely. An estimated $4.6 billion worth of goods were affected, with a catastrophic impact on Canada's economy. In recent days, workers at India's 12 biggest ports have announced an indefinite strike from August 28th because they are not being paid long-term allowances. To this end, the freight forwarding giant Kuehne & Nagel also issued a warning that if the strike is implemented, it is expected to have a serious impact on cargo transportation, resulting in cargo delays, rising transportation costs and serious congestion at Nawashewa port.
As an example, the strike of the Canadian railway Union, which has already taken place a few days ago, will have no small impact on freight rates. It is reported that Hapag-Lloyd, concerned about the impact of the rail strike on freight, directly added an extra $350 per bill of lading for containers shipped on the water, destined for Canadian ports but delivered in the United States. Customers are also advised to try to replace rail with other trucking options within Canada, and even to use U.S. ports as loading points.
The second half of the year may usher in a highly uncertain maritime market, but in fact, the freight rates of the relevant maritime lines have changed. In its latest official website notice, Hapag-Roth announced that starting August 28, 2024, it will increase GRI rates for shipments from Asia to the West Coast of South America, Mexico, Central America and the Caribbean, and that this adjustment will continue until further notice. It is reported that 20-foot and 40-foot dry cargo containers and 40-foot non-operational reefers will be uniformly increased by $2,000 per box.
According to the information disclosure of the Zhejiang Committee of the China Council for the Promotion of International Trade, at present, the global maritime market is experiencing a series of significant changes, mainly reflected in freight fluctuations, excess capacity and the adjustment of market competition pattern. As a result, the overall freight market is showing a chaotic trend.
However, the freight rates of many regional routes have also declined, such as the European ground line, the Middle East line and the Southeast Asian line in East and South China in early September; There are also some lines that continue to rise, such as the United States line in East China, the Central and South American line, and the Australia-New Zealand line. Not long ago, Clarkson, a third-party research institution, mentioned in the shipping market outlook report for the second half of this year that in the second half of the year, under the background of further increasing uncertainty of global economic trends, increasing geopolitical risks, declining supply chain stability and the overall low growth rate of fleet supply, the shipping market segment may still appear "differentiated" performance and freight volatility.
For this volatility, some experts have analyzed that the market's freight rates have tended to be flexible and immediate. For example, once the receipt of goods is not good, the shipping company will quickly adjust the rate. The traditional 1:4 ratio mode between the long contract price and the spot price has been broken, and the 1:1 pricing method is now mostly used, resulting in a substantial decrease in the actual charge level. But despite the decline in the actual level of charges, compared with the pre-epidemic, the current freight rate is still well above the cost price of nearly twice.
This article comes from the logistics salon