Here’s How Much Asia-to-US Container Rates Could Jump on a 1-Week Port Strike

Container vessels are piling up on the U.S. East and Gulf Coasts on day three of the ILA dockworkers strike as there appears to be very little to no progress in the contract negotiations.

East Coast Port Strike Suspended as ILA, USMX Agree on Wages; Retailers Rejoice

As of Thursday morning, at least 54 container ships were waiting outside nine major U.S. ports affected by striking members of the International Longshoremen’s Association (ILA), according to data from Everstream Analytics. Fifteen have called at the Port of Savannah, while another 14 are lingering near the Port of New York & New Jersey.

The supply chain risk management firm had noted on Wednesday that the line across the ports could easily grow to 100 by the end of the week as more vessels are on the way.

In the first week of the strike, the capacity loss will be at its highest, according to data from maritime trade advisory service Sea-Intelligence. This total will tally roughly 775,000 20-foot equivalent units (TEUs) tied up on the East and Gulf Coasts, and would represent 2.5 percent of the global container fleet.

In the subsequent three weeks, another 443,000 TEUs on average would be stuck at sea.

A four-week strike would result in a tie-up of 6.8 percent of the worldwide container shipping fleet along the East and Gulf Coasts.

In total, Sea-Intelligence said there are 331 deep-sea container vessels scheduled to make a total of 981 distinct port calls in 20 distinct East Coast ports across the U.S. and Canada from Oct. 1 to Oct. 30.

With all these ships set to strain capacity worldwide, the maritime service expects an accompanying hefty bump in ocean freight rates . Throughout both the Covid-19 pandemic and the Red Sea crisis , Sea-Intelligence says it “consistently proved a 90-plus percent correlation between the loss of global fleet capacity and spot rates” for both global and individual trade-lane-level indices.

“We found that for each percentage point increase in the loss of global fleet capacity, spot rates on Asia to U.S. East Coast would increase $993 per 40-foot container, while Asia to U.S. West Coast spot rates would increase $805 per 40-foot container,” Sea-Intelligence said in a blog post.

If this data upholds, the first week of strike would see spot rates increase $2,000 per 40-foot container from Asia to the U.S. West Coast, and $2,500 from Asia to the U.S. East Coast. For each subsequent week of the strike, the model suggests that spot rates will increase by $1,100 per TEU on the trans-Pacific route and $1,400 per TEU on the Asia-to-U.S. East Coast trade lane.

Retail Angst Over Port Strike Grows

Given the added costs that are likely to reach American shippers, as well as their customers, Transportation Secretary Pete Buttigieg called on ocean carriers to withdraw the surcharges they began implementing in recent weeks ahead of the strike. These fees largely varied between $1,000 to $1,500 per TEU for shippers planning on taking certain trans-Atlantic routes to East and Gulf Coast ports.

Buttigieg’s pleas have not stopped the carriers from scrapping any of their respective charges, although most of them have not gone into effect yet other than MSC’s on Oct. 1.

But in another way to skirt the damages posed by the port strike, some ocean carriers including Cosco Shipping, Ocean Network Express (ONE), CMA CGM and APL are invoking force majeure , a clause aimed at absolving the liners from fulfilling contract obligations due to events entirely out of their control.

This means that when container vessels divert to other ports instead of the original stop, the importer of the cargo must pay for the storage and transportation costs after the drop-off—not the carrier. For retailers and brands, this represents a complete headache that could result in the passage of higher costs to consumers.

Fees of this nature have played into some of the major complaints of the ILA during the contract negotiation process with regards to the profits the companies within the U.S. Maritime Alliance (USMX) made during the Covid-19 pandemic.

On Tuesday, President Biden implored the USMX to present a fair contract to the ILA, saying that the administration would monitoring for “any price gouging activity that benefits foreign ocean carriers.” The port employers have offered the union a nearly 50 percent wage increase.

A Wednesday statement from the USMX indicated that any contract agreement requires negotiating, but the group would not agree to any preconditions set by the union (such as a $5 per hour wage increase for each year of the deal) to return to the bargaining table. While the port employers say they are committed to bargaining “in good faith,” there are no signs of further engagement.

The ILA did not reference the status of the negotiations in its own notice later that day, instead focusing on alleged death threats against outspoken president Harold Daggett and other top union officers.

Since the strike began, Daggett has been the subject of multiple articles from publications from the Wall Street Journal and the New York Post, with the president claiming the latter was “full of false accusations” against him. He also chided the Post for listing his address and other details of his personal life.

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