Although the logistics industry has always suffered from work stoppages, strikes — combined with terrorism in the Red Sea, severe weather and geopolitical tensions – have become leading disruptors of global freight. Labor-related incidents increased 42 percent between the first half of 2023 and 1H of 2024, according to Resilinc, which monitors supply chain risk.
As the supply chain now braces for potential strikes at Canadian railways and U.S. East and Gulf Coast ports, ocean freight rates remain lower than a year ago, according to freight marketplace Freightos. Some carriers are offering discounts in order to move containers from Asia to the U.S. East Coast before the strikes. This deadline may add some buoyancy to West Coast rates as more volumes shift there from the East and Gulf.
Electronics are among the five leading goods carried by sea.
The International Longshoremen’s Association (ILA) and port operators are still far apart on issues like wages and port automation, Freightos added, and with negotiations suspended, a strike in early October is looking more and more likely. Somewhat ironically, automation is viewed as one way to improve supply chain efficiency.
These disruptions, particularly during peak shipping season, threaten to exacerbate existing challenges within the supply chain, said Christian Roeloffs, cofounder and CEO of Container xChange.
A strike would strand imports and exports already at East Coast and Gulf ports, Freightos added, and create backlogs and tie up capacity as some vessels wait for ports to reopen. Reduced capacity and diversions to West Coast alternatives could lead to spiking rates and congestion at these ports too. Maersk estimates that a one-week shutdown could take four to six weeks to recover from fully, with significant backlogs and delays compounding the longer the strike lasts.
Upward rate pressure – from levels already elevated by Red Sea complications already absorbing much of the available capacity in the market – could therefore persist even after the strike ends, and, if the strike lasts long enough, seasonal demand increases ahead of Lunar New Year would put additional pressure on operations and rates.
ILA President Harold Daggett recently hinted that, just as they did as a show of solidarity during the last ILA strikes in 1977, West Coast port workers could refuse to process vessels diverted from the East Coast, which is a scenario that would disrupt supply chains further.
Though unlikely in an election year, the White House could order an 80-day cooling off period if it deems the strike a threat to national health or safety, according to Freightos. The ILA has opposed government intervention, and has said that if forced back to work, union members would deliberately slow down operations anyway.
There have been other recent disruptions. A super typhoon wreaked havoc on northern Vietnam over the weekend and caused heavy rains across southern China. The disruption is leading to delays for ocean logistics out of Haiphong, has held up vessels transiting through the region and shut down some container terminals in Hong Kong over the weekend.
In air cargo, Air Canada is bracing for disruptions from a possible pilot strike in mid-September. And the surge in e-commerce volumes moving by air is now having an impact beyond China, with reports of congestion at air hubs in Korea, Taiwan, Japan and the Philippines even before the expected demand increase in Q4. Freightos Air Index rates from China to N. America and Europe were $5.82/kg and $3.45/kg last week, respectively, which are levels typically reserved for peak season.
Impact on freight rates
Ocean rates from Asia to Europe are now 20 percent lower than in mid-July, likely signaling the early end to this year’s peak season, Freightos reported. Container import volumes to the U.S. likely peaked – a little earlier than usual and at a near record level – in August and are projected to dip slightly in September and significantly in October.
This pull forward in demand was partly motivated by shippers trying to get ahead of a possible ILA port worker strikes at East Coast and Gulf ports on October 1st. Ocean rates are likely to decrease significantly from Asia to the East Coast soon as it is too late to receive goods before the end of the month, the firm added, but prices may be more buoyant to the West Coast as demand shifts there.
Red Sea diversion-driven longer transit times and delays at Asian origin ports motivated shippers to start ordering early and import volumes from Asia likely peaked in June and early July, Freightos explained. With late September as this year’s deadline for European importers to move goods in time for the holiday season, rates that have declined more quickly in the last couple weeks may have further to fall as seasonal demand dries up.
Transpacific peak season got off to an early start too, but volumes are estimated to have continued climbing to a near monthly record in August and are projected to dip just 3 percent this month before a significant drop off in October.
Compared to Europe, this demand strength has kept rates from falling as significantly, especially from Asia to the East Coast where part of this year’s front loading was due to the added urgency of moving shipments before a possible ILA port worker strike on October 1st.
Ocean rates – Freightos Baltic Index:
- Asia-US West Coast prices (FBX01 Weekly) stayed level at $6,837/FEU.
- Asia-US East Coast prices (FBX03 Weekly) fell 3% to $9,130/FEU.
- Asia-N. Europe prices (FBX11 Weekly) fell 13% to $6,787/FEU.
- Asia-Mediterranean prices (FBX13 Weekly) fell 4% to $6,011/FEU.
Air rates – Freightos Air index
- China – N. America weekly prices increased 14% to $5.82/kg.
- China – N. Europe weekly prices fell 4% to $3.45/kg.
- Europe – N. America weekly stayed level at $1.66/kg.
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