US East Coast ports strike customer advisory - Container xChange

Implications of Looming labor strikes on U.S. container trade and supply chains

September is traditionally one of the busiest months for U.S. containerized imports, driven by the peak shipping season as businesses prepare for the holiday rush. However, this year presents an unprecedented combination of challenges that could heavily impact supply chains. Potential labor strikes, natural disasters, and tariff uncertainties are converging, creating a highly volatile environment for global trade. This also led to the pulling forward of orders by retailers, which led to strong inventories in the US.

In August 2024, U.S. container cargo imports surged by 12.9% year-over-year, with major ports handling nearly 2.5 million TEUs. While this reflects strong freight demand, it also intensifies concerns as labor strikes loom on October 1st. “The possibility of strikes in US East Coast and Gulf Coast Port adds uncertainty for container shipping professionals doing business in the US,” shared Christian Roeloffs, co-founder and CEO of Container xChange.

For container trading and leasing companies, these disruptions could lead to significant delays and port congestion, impacting equipment turnaround times. “Companies should anticipate short-term spikes in demand for leased containers as retailers rush to secure goods ahead of potential disruptions, particularly for seasonal inventory and industrial shipments,” Roeloffs further added.

"While the threat of strikes looms large, it’s important to note that U.S. inventories are currently strong due to the pulling forward of orders earlier this year to avoid existing disruptions. This stockpile will act as an essential buffer, mitigating the risk of container rates spiking dramatically due to the strikes.

Additionally, with no significant signs of peak season demand strengthening, these strikes might not have as intense an impact as historically seen. However, the overall impact will largely depend on the duration of the strikes, with prolonged disruptions having the potential to intensify the implications for supply chains, leading to more pronounced bottlenecks and greater challenges in container availability. " Shared Roeloffs.

Potential U.S. Strikes on October 1st

The International Longshoremen’s Association (ILA), representing more than 85,000 dockworkers on the East and Gulf Coasts of the U.S., faces a contract expiration on September 30, 2024. As negotiations with the United States Maritime Alliance Ltd. (USMX) show signs of breaking down, a strike now appears increasingly likely, threatening to disrupt nearly half of the nation's ocean trade.

Maersk has already warned of severe disruptions, noting that even a brief strike could result in weeks of recovery due to accumulated backlogs. The uncertainty is compounded by the fact that the duration of these strikes is unclear—it could be resolved within weeks or drag on for months, as seen with the West Coast strike last year.

“Leasing rates may rise sharply as importers seek to secure containers amid potential delays. In this environment, traders will need to diversify their partner networks, sourcing strategies, and explore alternative ports to mitigate container shortages," shared Roeloffs.

A Volatile Market for Container Traders

"September is usually crucial for U.S. containerized imports due to the approaching holiday season. However, this year presents compounded uncertainties," Roeloffs commented.

Beyond U.S. port strikes, other challenges such as geopolitical instability, Houthi attacks in the Middle East, and the restructuring of global shipping alliances are contributing to market volatility.

Supply Chain Disruptions and Port Congestion

In the event of labor strikes, East and Gulf Coast ports will experience congestion, delaying container turnarounds. Traders could face increased demurrage and detention fees as containers remain stuck at the port. The backlog of cargo could create equipment shortages, raising leasing rates as demand spikes. Some businesses may be forced to reroute shipments through alternative ports, adding logistical complexities and costs.

These uncertainties will fuel market volatility for container trading companies, with unpredictable container prices and availability. Traders may have to adjust their sourcing strategies, while maintaining flexibility to adapt to changing market conditions.

Potential Impact on Customers

• Container Trading Companies: Expect fluctuating demand and availability of containers as trade routes realign and U.S. port operations face potential delays. Having alternative strategies for equipment sourcing will prove essential to mitigate bottlenecks.

• Container Leasing Companies: The expected surge in demand for container equipment during the peak season could drive leasing rates upward, especially in the event of prolonged labor strikes or storm-related disruptions. Planning for repositioning and anticipating changes in demand across regions will be key to maintaining business continuity.

Preparing for Disruptions

As U.S. container trading and leasing companies navigate these disruptions, we encourage close monitoring of the evolving labor negotiations, weather risks, and global shipping alliance restructuring. We anticipate short-term demand spikes, potential container shortages, and fluctuating leasing rates as the market reacts to these external pressures.

Container xChange will continue to provide timely insights and solutions to help our customers navigate this complex landscape. Flexibility, diversification of supply chains, and maintaining agility in operations will be critical to mitigating the impact of these disruptions.