NORFOLK, Va. — Leading up to the U.S./Canada East and Gulf Coast labor contract expiration on Sept. 30, there is a lot of uncertainty throughout the market. There’s been no progress in labor negotiations over recent months, and it seems likely that a labor disruption will occur effective Oct. 1. It’s also possible we will see port work slowdowns begin before the official contract expiration date. The duration of any disruption or strike is unknown; hopefully any action will last only a few days, if that long.
A disruption of any length will cause congestion and delays. Prolonged labor stoppages will create massive supply chain delays throughout the country and overseas if vessels begin to line up outside ports. Alternatives are West Coast ocean routings and air freight for the most urgent shipments, though those options may become inundated with volume as well.
In anticipation of a potential labor strike, demand to West Coast ports is up. Carriers have added sailings, and they are filling up fast. East and Gulf Coast demand is weaker, as expected, as shippers shift cargo to West Coast gateways.
Rates also are volatile; out of Asia, levels have been softening gradually since July, but we expect West Coast rates will increase as of Sept. 15. East and Gulf Coast from Asia may continue to decline, but with the potential for major congestion, we could see extra charges announced. There is still a wide range of rates in the market — FAK (freight of all kinds) levels remain relatively strong compared to fixed contract rates, but carriers are still offering special spot deals for specific sailings (although many of those sailings are filling up fast, and cargo booked on those low deals is likely to roll).
From Europe, rates have increased along with demand as shippers try to get ahead of the potential strike.
Shippers on all trades to and from the U.S. should be prepared for delays in the coming weeks. If shipments can be delayed until later in October or November, it would be a good idea to consider postponing until the market settles. We will provide updates as they are received.
Rachel Shames is vice president of pricing and procurement at logistics services firm CV International.