The ports in the western United States are still on strike, and shipping costs may increase significantly! Shipping companies have announced a GRI increase

Ports in Western US on strike, shipping costs may increase GRI increase announced

Boosted by the surge in US freight rates, the Shanghai Containerized Freight Index (SCFI) has finally returned to the 1,000-point level after two consecutive weeks of increase.

Rate Increases, US West Coast Rates Up Nearly 20%

According to the latest data released by the Shanghai Shipping Exchange on June 2nd, the SCFI index rose 45.34 points to 1,028.7 points last week, with the weekly growth rate expanding from 1.13% in the previous week to 4.6%.

The US West Coast freight rates increased by nearly 20%, and the US East Coast freight rates also increased by over 10%, but the European freight rates are still falling.

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• The Far East to US West Coast freight rates rose by $268 to $1,666 per FEU, with the increase further expanding from 5.19% in the previous week to 19.17%;

• The Far East to US East Coast freight rates increased by $260 to $2,634 per FEU, with the increase expanding from 0.38% to 10.95%.

• The European freight rates fell by $13 to $846 per TEU, with the decline expanding from 1.15% in the previous week to 1.51%;

• The Mediterranean freight rates fell by $13 to $1,638 per TEU, with a weekly decline of 0.79%.

• The Santos route in South America saw a continued increase of $163 to $2,236 per TEU, with a weekly increase of 7.86%.

Industry insiders say that the surge in spot freight rates on US routes reflects the benefits of the rate hikes announced by shipping companies ahead of the June rate increase on US routes.

Previously, major shipping companies such as Mediterranean Shipping Company, CMA CGM, Evergreen Line, and Yang Ming Line had successively issued rate increase notices, planning to raise the rates by $1,000 per FEU, but the actual increase was approximately $400.

It is estimated that due to factors such as oil prices and wage inflation, the average cost per TEU for operating large container ships with a capacity of over 10,000 TEUs on US routes is now between $1,300 and $1,400, while for medium-sized ships with a capacity of 7,000 to 8,000 TEUs, the average cost per TEU will increase to $1,500 or more.

The freight market of container shipping has been falling since the second half of last year, and many ships have fallen below the cost line and suffered losses. Shipping companies believe that freight rates have bottomed out, and while they are reducing the number of available cabins, they are calling for an increase in freight rates. They successfully raised the prices for the second time this year, but how long the increase will last is the key issue.

Currently, large U.S. retailers are starting to replenish their inventory, but their volume is limited, while small and medium-sized e-commerce businesses are hoarding goods, and inventory pressure remains high. In addition, the oversupply of shipping capacity may reduce the strength of the price increase.

Oversupply has become the biggest challenge in the container shipping market. According to the latest market forecast by Alphaliner, global shipping capacity will grow by 8.3% this year, while demand will only grow by 1.4%, and next year, shipping capacity will grow by 8.9%, while demand will grow by 2.2%. The growth rate of shipping capacity in the next three years will be the highest in a single year.

West Coast port disruption continues for the fourth day

Freight rates may soar

As contract negotiations between employers and employees have reached a stalemate, the current wave of strikes at West Coast ports has entered its fourth day.

The Pacific Maritime Association (PMA), representing shipping carriers and terminal operators, said on Friday that dockworkers were “taking coordinated, disruptive job actions,” which have stopped or seriously interfered with operations at the comprehensive container ports from Los Angeles and Long Beach in Southern California to Seattle, with the most disruption and damage occurring at the port of Oakland.

According to port officials, dockworkers have not shown up for work on time since Thursday evening, and have slowed down their work speed at the port. This situation has continued on Friday, and the strike is continuing over the weekend and is still ongoing on Monday.

The International Longshore and Warehouse Union (ILWU) International President Willie Adams said in a statement that negotiations are ongoing. The latest strike action took place as labor negotiations between the PMA and the ILWU entered their 13th month.

“We will not accept an economic package that does not recognize the efforts and personal sacrifices of ILWU workers who helped the shipping industry achieve record profits during the early stages of the pandemic and the surge in cargo,” Adams said.

According to data from Descartes Datamyne, West Coast ports in the US handled 40% of the country’s total container imports in the first quarter of this year, down from 45% during the same period in 2019.

In recent weeks, severe drought and the potential arrival of an El Niño phenomenon have led to a series of draft limitations by the Panama Canal, causing huge impacts on shipping costs and transit times for shippers on the US East Coast.

“If this issue is not resolved quickly, a domino effect can be foreseen,” said Lars Jensen, CEO of consulting firm Vespucci Maritime, in a LinkedIn post.

According to Jensen, ships will queue up on the West Coast, just like they did during the prolonged strike action eight years ago. Jensen predicts that if the strike becomes widespread and lasts for a long time, shipping costs to the US may increase significantly.

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Source: Foreign Shipping, Shipping Online, International Ship Network, infringement deleted.

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