Key insights:
1 ILA - USMX negotiations were set to restart today as the Jan. 15th strike deadline rapidly approaches, but the sides remain far apart on the role of port automation. President elect Trump’s support for the union has some anticipating the strike will be brief, but others suspect carriers may prefer a longer shutdown anyway if it will boost revenue in the short term.
3 A prolonged shutdown would eventually reduce capacity and equipment levels in Europe and Asia, causing delays and rate increases for lanes out of those hubs. A significant shift of volumes to the West Coast is probably unlikely, as many shippers, with peak shopping season over, may prefer delayed containers over the cost of a coastal shift.
4 Transpacific container rates climbed sharply last week on pre-Lunar New Year demand. Prices are up to the $6,000/FEU level to the West Coast and at about $7,000/FEU to the East Coast, both already above last year’s LNY highs.
5 Asia - Europe/Mediterranean rates climbed only moderately last week after significant increases in November and early December as LNY demand started earlier than usual on these lanes due to longer lead times from Red Sea diversions.
6 The pre-holiday rush is already leading to increased congestion and equipment shortages in China, the Philippines and Vietnam. Labor shortages and strikes in some areas are also leading to congestion and delays in Hamburg, Rotterdam and in some ports in Spain and Italy.
7 With air cargo’s peak season now over, China - N. America prices that climbed past $7.00/kg in December are now back to about $6.00/kg and Asia – Europe air rates fell back to $3.44/kg last after climbing above the $5.00/kg mark.
8 Transatlantic air rates, which increased 75% to more than $3.00/kg from October to mid-December, eased to $2.12/kg. Much of the climb is attributed to capacity shifts to the pacific, but this dip suggests some N. American peak season volumes were routed through Europe.
Ocean rates - Freightos Baltic Index:
• Asia-US West Coast prices (FBX01 Weekly) increased 23% to $5,929/FEU.
• Asia-US East Coast prices (FBX03 Weekly) increased 13% to $6,934/FEU.
• Asia-N. Europe prices (FBX11 Weekly) increased 8% to $5,558/FEU.
• Asia-Mediterranean prices (FBX13 Weekly) increased 3% to $5,630/FEU.
Air rates - Freightos Air index
• China - N. America weekly prices increased 8% to $6.15/kg.
• China - N. Europe weekly prices fell 20% to $3.44/kg.
• N. Europe - N. America weekly prices fell 8% to $2.12/kg.
Analysis
The January 15th expiration of the interim ILA - USMX agreement set at the conclusion of the three day October strike is rapidly approaching.
Talks resumed but quickly collapsed in November with the sides far apart on the role of automation and semi-automation at these ports. Negotiations are scheduled to restart today though carriers are preparing for a strike, with Maersk urging shippers to pick up or return containers as soon as possible at East Coast and Gulf ports, and multiple carriers announcing mid-month disruption surcharges ranging from $850 to $2,000/FEU.
President elect Trump has explicitly backed the ILA position against automation, and with the deadline five days before the inauguration there’s speculation that the USMX – made up mostly of foreign ocean carriers – would face significant pressure to concede. In this scenario, if there is a strike it may be brief.
On the other hand, if the carriers expect to lose in any case, some suspect the carriers may hold out for longer, which would create congestion, backlogs, and increased freight rates and revenue for the carriers in the short term.
If the talks do not lead to a quick breakthrough we’ll likely see ports and carriers announce additional preparations like those in late September. These steps included deadlines to pick up or drop off containers, extended gate hours, reefer booking suspensions, some vessel diversions to East Coast alternatives for ships scheduled to arrive around the deadline, and stopped-clocks on demurrage charges for containers stuck at ports during the strike.
A prolonged shutdown would eventually impact vessel and container availability at origin ports in Europe and Asia, which could spread the strike’s impact beyond North America causing delays and rate increases for lanes out of those hubs.
A significant shift of volumes or diversions to the West Coast are probably unlikely, as many shippers, with peak shopping season just behind them, may be willing to have containers wait at sea or at ports rather than incur the additional costs and hassle of a coastal shift.
Unrelated to the possible strike, transpacific container rates climbed sharply to start the year on GRIs supported by pre-Lunar New Year demand. Prices are up to the $6,000/FEU level to the West Coast and at about $7,000/FEU to the East Coast, with West Coast prices already 20% higher than their LNY peak last year and East Coast rates 3% higher. Volumes are likely already stronger than usual on some frontloading ahead of expected tariff hikes. Though some carriers are considering an additional GRI mid-month, there is skepticism that another increase attempt would succeed so close to the holiday period.
Asia - Europe and Mediterranean rates climbed only moderately last week after significant increases in November and into early December as LNY demand started earlier than usual this year on these lanes due to longer lead times from Red Sea diversions. The pre-holiday rush, as well as some bad weather, is already leading to increased congestion and equipment shortages in China – with delays of up to four days in Shanghai, Qingdao and Ningbo – and in the Philippines and Vietnam as well.
Labor shortages and strikes in some areas are also leading to congestion and delays at European hubs like Hamburg and Rotterdam as well as ports in Spain and Italy. These factors could cause additional upward pressure on rates leading up to LNY.
Ex-Asia rates should ease as seasonal demand decreases later in February and into March. For Asia-Europe trade, prices may fall back to the $3,000-$4,000/FEU Red Sea-adjusted floor reached last March and again in October, though for the transpacific continued frontloading ahead of expected tariffs could keep rates from easing as significantly.
With air cargo’s peak season now over, Freightos Air Index data shows ex-China rates have started to decline. China - N. America prices that climbed past $7.00/kg in December are now back to about $6.00/kg. This level is one it held for much of H2 last year, but is still well above the long term non-peak average of about $2.00/kg as e-commerce volumes continue to impact the market.
Asia – Europe air rates fell back to $3.44/kg last week after climbing above the $5.00/kg mark briefly in mid-December. And transatlantic rates, which increased 75% to more than $3.00/kg from October to mid-December, have now eased to $2.12/kg. Much of the rate climb on this lane is attributed to peak season capacity shifts to the pacific, but the recent dip suggests some N. American peak season volumes were also being routed through Europe.
