‘Something is Boiling’: East Coast Cargo Rates Set to Soar

The potential for an East Coast port strike on Oct. 1 is concerning for global trade, retail and consumers alike, but the container shipping industry may be in for another income boost if dockworkers representing the International Longshoremen’s Association (ILA) walk off the job.

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While ocean freight rates have largely deescalated from their 2024 highs in mid-July and were suspected to have plateaued , a strike would force more containers westward and create more cargo capacity constraints that would again drive up demand—and therefore, prices.

“If a strike is confirmed at all U.S. East and Gulf Coast ports, there will be limited alternative routes available to shippers on a large scale,” said Philip Damas, managing director of Drewry Supply Chain Advisors. “In our view, a port strike will likely push up ocean freight rates by several hundred dollars on both the Asia-U.S. East Coast and Europe-U.S. East Coast routes, with the quantum dependent on the duration of the port closures or port slowdowns.”

As of Aug. 15, Drewry’s World Container Index (WCI) says that the rate for a 40-foot container on the Shanghai-to-New York route is $8,764 per 40-foot container, while the Rotterdam-to-New York price is a much cheaper $1,961 per container.

The Shanghai-to-Los Angeles route is $6,303 per container on average—a differential of nearly $2,500 between containers entering the East Coast and West Coast.

Another major benchmarking platform for spot freight rates, Xeneta, measured an approximate $2,900 gap between the coasts, with East Coast inbound cargo coming in at $9,651 compared to $6,739 on the West Coast.

Xeneta’s chief analyst Peter Sand told Sourcing Journal that the wide spread means “something is boiling” on the East Coast, which works heavily in the ocean carriers’ favor.

“Shippers have been frontloading into the U.S. East Coast, opening the spread for a normal $900 per FEU to an abnormal $3,000 per FEU,” Sand said. “This is the silver lining for the carriers—the opposite for shippers who face another costly disruption.”

Carriers at large have been assuming some disruption will happen or expect that shippers will pull cargo forward, according to Damas. That would stay in line with the trend that has occurred since before the summer, when retailers began ordering cargo earlier in the wake of the potential labor strike, as well as then-rising freight rates.

“We already have seen carriers announce various general rate increases or peak season surcharges on the trans-Atlantic route,” Damas said. For example, Mediterranean Shipping Company (MSC), Maersk, Hapag-Lloyd and CMA CGM have all implemented a peak surcharge out of northern Europe or the Mediterranean Sea—all of which are kicking in starting September.

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Container shipping giants have already made significant profits in 2024 due to the pricing impacts brought on by the Red Sea crisis, which has forced ships to divert around Africa instead of traveling through the Suez Canal. In the first quarter, the industry brought in $5.4 billion in net income, and is expected to bring in more in Q2, according to analysis from container shipping expert John McCown.

There’s a low chance of a crossover between a likely rail shutdown in Canada Thursday and a work stoppage at the East Coast ports at the beginning of October. But Christian Roeloffs, co-founder and CEO of Container XChange, agreed that on the rarity that such a scenario would occur, that an uptick in freight rates would be “immediate.”

“In the mid-term, we could face increased volatility in freight rates, with potential spikes driven by supply chain bottlenecks and congestion,” Roeloffs said in a statement. “Shippers and cargo owners should prepare for higher costs and possible delays as the industry adjusts to these challenges.”

As shippers monitor the gap in price between cargo entering both U.S. coasts and analyze their options, they’ll see more capacity being deployed into the West Coast from the Far East in coming weeks, Sand said. The Ports of Los Angeles and Long Beach have already felt this influx of cargo in July, with the twin gateways respectively bringing in a massive uptick of 37.6 percent and 60.5 percent more inbound cargo than the year prior.

But despite the larger trend to shift cargo west ahead of a Sept. 30 negotiation deadline, Sand warned that many will still “‘bet on a swift solution’ to whatever problems come about on the East Coast and Gulf Coast—a risky approach if that’s the only thing you are doing.”

Even for trans-Atlantic trade, shippers are going to be in a bind as there are just 41 days until a strike can occur, as of Wednesday.

According to Xeneta, a typical route from Genoa, Italy to the Port of Savannah would take 24 days from port to port, and another 10 days’ worth of land operations at either end—illustrating that shippers still looking to bring in product on that route must act soon.

“European imports are arguably even more at risk that Asian imports into the East Coast, as the alternatives are appallingly poor,” Sand said.

The ILA has not returned to the bargaining table with their maritime employers, the United States Maritime Alliance (USMX), since contract negotiations stalled in June. The union expects to outline its contract demands to delegates on Sept. 4-5.

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