The International Longshoremen’s Association (ILA) strike action at US east and Gulf Coast ports will cause supply chain ‘carnage’ and damage the US economy, according to data platform Xeneta.
More than 40% of containerised goods enter the US through both regions and the strike is estimated to be costing $5bn a day.
But while the impact is severe, Xeneta – whose research is based on more than 450 million crowdsourced datapoints – took issue with ILA claims of soaring prices.
Average spot rates on the major front haul from the Far East to US East Coast stand at around $7,000 per FEU [40ft container] and while average spot rates from North Europe to the US East Coast have increased 50% since the end of August, they are still only $2,800 per FEU.
Peter Sand, Xeneta Chief Analyst, said, “The union is representing its members and clearly has grievances to raise, but muddying the waters with misinformation does nothing to help resolve the situation.”
“This claim by the ILA must be corrected because we have seen in the past how rumour and false information causes panic in the market and spiralling freight rates as shippers rush to protect supply chains.”
“If a shipper does not have access to data to benchmark their own freight rates, they may believe the ILA’s claim of $30,000 per container and the market enters a vicious circle of higher and higher rates being paid.”
“It cannot be ruled out that one desperate shipper has paid [this] in a very extreme example, but this freight rate is certainly not representative of the market.”
Sand reiterated his belief that Government intervention will be required to bring the dispute to an end. Imports of foodstuffs have already been impacted – a sector where industrial gases play a key role – and there are fears it could spur inflation. Helium exports from the US to Europe look likely to be disrupted (click here).
He said, “The longer the strike action goes on and the longer it takes the US Government to intervene, the deeper the damage will be to the economy and longer it will take for ocean supply chains to recover.”
Law firm Husch Blackwell said shippers should begin forming contingency plans for a longer term event, warning that many of the ‘quick fixes’ such as pulling orders forward, rerouting shipments or shifting to air freight many not be viable over a longer timeline.
A Department of Transport statement said, “Our Administration supports collective bargaining as the best way for workers and employers to come to a fair agreement, and we encourage all parties to come to the bargaining table and negotiate in good faith – fairly and quickly.”
