With two weeks to go before the end of the current East and Gulf Coast labor contract and the start of the Golden Week holiday in China, many uncertainties remain. Labor is poised to begin a strike on October 1, and with no formal negotiations scheduled in the interim, a work stoppage seems likely. Whether the strike lasts for a few days or longer, congestion will cause delays for shippers across the country.
Demand for freight into West Coast ports has increased ahead of the East and Gulf Coast contract deadline, though overall volume from Asia to the US has slowed from the peak in June/July. Rates to all US destinations are down considerably as well from their recent peak. China factories and offices will be closed for the first week of October, the Golden Week holiday, and ocean carriers have implemented significant blank sailings in response to the expected further slowdown. Carriers are hoping to stem the tide of rate reductions; they have attempted to maintain two short-term rate levels, a standard FAK level and a more aggressive spot level that applies by specific vessel.
The labor situation notwithstanding, the expectation is that import volumes will be softer in the coming months, and carriers will be challenged to maintain higher spot rate levels. They are likely to continue the blank sailing strategy to keep capacity under as much control as possible, especially with significant new vessel capacity scheduled to enter the market in 2025.
Anticipated changes to the global ocean carrier alliance structure are coming into clearer view. The FMC approved the Gemini Cooperation, the new alliance between Maersk and Hapag-Lloyd that will utilize a hub-and-spoke setup to achieve their goal of 90% schedule reliability. MSC revealed a new global coverage plan that includes slot sharing with ZIM on the Transpacific Trade. The remaining carriers from THE Alliance, ONE, HMM, and Yang Ming, announced their new network, the Premier Alliance.
The new year will bring more change and, most likely, continued volatility. Please continue to plan ahead, communicate quarterly forecasts, and ensure bookings are placed early, at least 3-4 weeks in advance of sailing.
Industry News
To keep current on the latest market and industry news, please subscribe to our client alerts, or follow us on LinkedIn.
Your CVI team is here to assist you through these current market challenges. Ocean freight, air freight, domestic road/rail, and Customs Compliance – count on our dedicated professionals to care for you and your supply chain. Call us and let us show you what we can do!
Rachel Shames
VP, Pricing & Procurement
CV International, Inc.