‘Something is Boiling’: East Coast Cargo Rates Set to Soar
The potential for an East Coast port strike on Oct. 1 is concerning for global trade, retail and consumers alike, but the container shipping industry may be in for another income boost if dockworkers representing the International Longshoremen’s Association (ILA) walk off the job.
While ocean freight rates have largely deescalated from their 2024 highs in mid-July and were suspected to have plateaued, a strike would force more containers westward and create more cargo capacity constraints that would again drive up demand—and therefore, prices.
More from Sourcing Journal
-
A 2-Week East Coast Port Strike Could Bottleneck Goods Into 2025
-
Congestion at Bangladesh's Chattogram Port Triggers 10-Day Delays
-
Port of Ningbo Explosion Yet Another Catalyst for Potential Congestion
“If a strike is confirmed at all U.S. East and Gulf Coast ports, there will be limited alternative routes available to shippers on a large scale,” said Philip Damas, managing director of Drewry Supply Chain Advisors. “In our view, a port strike will likely push up ocean freight rates by several hundred dollars on both the Asia-U.S. East Coast and Europe-U.S. East Coast routes, with the quantum dependent on the duration of the port closures or port slowdowns.”
As of Aug. 15, Drewry’s World Container Index (WCI) says that the rate for a 40-foot container on the Shanghai-to-New York route is $8,764 per 40-foot container, while the Rotterdam-to-New York price is a much cheaper $1,961 per container.
The Shanghai-to-Los Angeles route is $6,303 per container on average—a differential of nearly $2,500 between containers entering the East Coast and West Coast.
Another major benchmarking platform for spot freight rates, Xeneta, measured an approximate $2,900 gap between the coasts, with East Coast inbound cargo coming in at $9,651 compared to $6,739 on the West Coast.
Xeneta’s chief analyst Peter Sand told Sourcing Journal that the wide spread means “something is boiling” on the East Coast, which works heavily in the ocean carriers’ favor.
“Shippers have been frontloading into the U.S. East Coast, opening the spread for a normal $900 per FEU to an abnormal $3,000 per FEU,” Sand said. “This is the silver lining for the carriers—the opposite for shippers who face another costly disruption.”
Carriers at large have been assuming some disruption will happen or expect that shippers will pull cargo forward, according to Damas. That would stay in line with the trend that has occurred since before the summer, when retailers began ordering cargo earlier in the wake of the potential labor strike, as well as then-rising freight rates.