AP Moller-Maersk has introduced a disruption surcharge of $3,000 per 40-foot equivalent unit (feu) for shipments to or from the US East Coast or Gulf Coast, in response to a potential strike by the dockers union starting on 1 October. This development is seen as an indicator of possible increases in container freight rates, according to Omar Nokta, an analyst at Jefferies. The surcharge reflects the anticipated rise in spot rates and carrier costs if the strike extends beyond a few days.
Container shipping stocks have experienced an uptrend, despite a reduction in spot freight rates, as the peak shipping season concludes. The early movement of cargoes into the US was a strategy by shippers to mitigate the impact of the potential strike by the International Longshoremen's Association (ILA). The uncertainty surrounding the strike has led to a decrease in volumes on the US East Coast and Gulf Coast, with rates from Asia to the East Coast dropping from $10,000 per feu in July to $5,000 to $5,500 per feu.
The potential strike is expected to have wide-ranging effects, not only on container and vehicle shipping but also on the US economy. Jefferies analysts have highlighted the lack of sufficient infrastructure to reroute cargo temporarily, though there might be some "breathing room" due to the timing of the post-peak-season slowdown. A stoppage at the ports would likely cause freight rates to surge as vessels would be immobilized, unable to offload cargo or resume normal operations.
Concerns extend to the potential economic impacts that might prompt action from President Joe Biden. Supply chain platform project44 has noted that even a brief strike could lead to prolonged recovery times for ports, with a one-day closure during 2023 disruptions on the West Coast taking three weeks for container dwell times to normalize. A full-scale strike on the East Coast could result in even more severe disruptions.
The ILA, representing dockworkers from Maine to Texas, is adamant about proceeding with the strike if its contract with the US Maritime Alliance (USMX) expires without a resolution. The stalemate continues as the union rejects what it considers a "stingy" wage offer from USMX, with ILA president Harold Daggett criticizing the employers' group for their inadequate wage package proposals.
Source: Trade Winds