Airfreight rates and demand expected to rise as US port strikes get underway

Strikes at US East and Gulf coast container and ro-ro ports got underway last night with expectations that the industrial action will result in modal shift to an already busy airfreight sector.

At midnight more than 45,000 members of the International Longshoremen’s Association (ILA) began strike action as an agreement could not be found with port bosses.

The ports handle more than half of all US containerised trade and the industrial action is expected to create supply chain hold ups at ports from Maine to Texas.

Freight forwarder Scan Global Logistics (SGL) said that at this stage it would continue to accept ocean bookings to the East Coast, but recommended that customers consider shipping via the west coast and then using overland options.

The company added: “All customers should review airfreight and sea-air products and services for critical cargo.”

SGL said that carriers were beginning to announce strike-related surcharges.

Another forwarder, Flexport, said that analysts estimated that each day of the work stoppage would lead to five-10 days of additional cargo build-up.

“And if a work stoppage lasts for more than a week, we could see severe capacity shortages and prolonged backlogs,” the company said.

In a note to customers, the company said: “Review all your inventory in transit to East Coast and Gulf Coast ports, and perform a risk assessment.

“Your key decision is whether you should reorder critical SKUs and route them via the West Coast (before prices spike), or move them via airfreight to diversify your risk.”

It added: “On the brink of the peak holiday season rush, businesses may begin to ship via air instead of ocean. Airfreight prices will likely surge, while capacity will continue to tighten in an already-strained market.”

At this stage, it is not clear how long the strikes will last. Reports suggest that a last-minute offer of a 50% pay increase over six years from terminal operator association, US Maritime Alliance (USMX), was rejected by the ILA, although at least the two groups have returned to the negotiating table after talks had broken now.

“In the last 24 hours, the USMX and ILA have traded counter offers related to wages,” USMX said last night.

“The USMX increased our offer and has also requested an extension of the current Master Contract, now that both sides have moved off their previous positions. We are hopeful that this could allow us to fully resume collective bargaining around the other outstanding issues – in an effort to reach an agreement.”

As well as wage increases, the union has also expressed concern over potential moves to automate certain terminal functions.

“Our offer would increase wages by nearly 50%, triple employer contributions to employee retirement plans, strengthen our health care options, and retain the current language around
automation and semi-automation,” the terminal group said.

Last week, box shipping marketplace Container xChange said that the fallout from a strike would hit industries like retail, automotive, and manufacturing hardest.

Christian Roeloffs, co-founder and chief executive of Container xChange, said: “The strike could push the container trade into chaos, with ripple effects that potentially will disrupt supply chains well. The congestion and delays at these major ports will severely impact the availability of containers, increase costs, and disrupt schedules.

“Small traders, in particular, may feel the squeeze as they are more vulnerable to price surges and extended delays in securing and moving their boxes. Businesses are acting now to reroute shipments and secure their container supply, or they risk being left stranded in a congested and costly aftermath.”

Retailers, for example, are already rushing to import goods ahead of the holiday season, the company said, without contingency plans, many companies will face severe shortages, missed deadlines, and skyrocketing logistics costs.

“The automotive industry, which relies heavily on timely shipments of parts and components, could see production delays, especially for vehicles assembled in the US with parts arriving through East Coast ports,” he added.

“Each day of the strike could mean five days of delays for businesses already struggling with tight margins and timelines. For many, this could be the breaking point.”

No resolution in sight as US east coast port strike action draws closer