Bleak supply chain outlook as USEC strike looms

Any disruption on the US Gulf and East coasts will have global ramifications, according to Drewry Shipping Consultant analyst Simon Heaney. With the major of exports from the US being empty containers, any disruption will likely cause significant equipment shortages in Asian export centres.

Heaney said the ILA union has been castigating “foreign carriers” for making large sums of money on the backs of the US consumer, but he added that there appeared to be a “growing intransigence on both sides,” which would mitigate against a settlement.

“The incentives are skewed against an efficient supply chain,” said Heaney, who conceded that the carriers had little incentive to settle, because rates would rise substantially in the event of industrial action, while the unions are pushing hard for major wage increases.

Meanwhile, the Democratic government has been distracted by the general election, and with the June negotiations having failed to materialise, the “rhetoric has just become worse”, said Heaney.

Nevertheless, the latest freight rate data shows the steady fall in global freight rates that began in July has continued throughout August, with the Shanghai Container Freight Index (SCFI) having fallen more than 700 points over the past eight weeks.

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As the SCFI dipped below 3,000 points to 2963.38 this week Drewry Shipping Consultant’s WCI composite index mirrored the Chinese index and fell 3%, week-on-week, with rates on the Asia to North Europe and Med down, 3% while Asia to both US coasts also declining 2%.

The most recent falls appear to substantiate what most industry observers have already indicated, that shippers are front-loading freight ahead of possible disruptions and congestion in the months ahead.

According to Hong Kong analyst, “no rebound is expected at the end of this year and no repeat of this year’s post Chinese New Year rate rally in 2025.”

An US east and gulf coast strike, where some 40% of US freight is imported, would change that outlook.

Drewry’s weekly index showed Shanghai to Rotterdam rates for 40ft box had declined week-on-week to $7,204, from $7,429/feu last week. Simalarly, Shanghai to Los Angeles rates showed a $149/feu decline to $6,248 and a $220/feu fall to $8,491/feu from Shanghai to New York.