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The threat of a strike at US East and Gulf Coast ports could put importers in a vicious cycle of shipping disruption, warns Xeneta, an ocean freight rate intelligence and benchmarking platform.

Suspension of negotiations and threat of automation

Earlier this week, the International Longshoremen’s Association (ILA) announced it was suspending negotiations with the United States Maritime Alliance (USMX) over a new labor contract for East and Gulf Coast port workers. The current agreement expires on September 30. The suspension is due to the concern of dockers about the implementation of automation solutions in some terminals, which they consider a threat to their jobs.

Importer concerns

Peter Sand, chief analyst at Xeneta, said the timing of the suspension couldn’t be worse for shippers, who have already brought forward imports ahead of the third-quarter peak season due to the impacts of the Red Sea conflict. Now, with the threat of a strike, they could further accelerate this approach, which could worsen port congestion in Asia and Europe and significantly increase shipping rates.

Increase in rates and port congestion

According to data from June, in the first four months of the year, 2.44 million containers arrived in the US from the Far East via East and Gulf coast ports, representing more than 40% of total container imports from that region.

Options for carriers

If major disruptions are expected on the East Coast, shippers could consider diverting imports to the U.S. West Coast or alternatives such as Vancouver and Mexico. However, this could restrict capacity and increase fares on those routes. Xeneta data suggests recent growth in spot rates could slow, but potential disruptions could keep them elevated for longer.

Impact on peak season

Sand warned that if union negotiations fail and a strike occurs, spot rates could remain high, especially if shippers bring forward imports of Christmas products. The situation could further complicate the already under-pressure supply chain.

The lack of an ideal solution and pressure on shipping networks could make the end of 2024 particularly difficult for US importers. East and Gulf Coast strikes, while rare, pose a real threat that requires risk management and careful planning by shippers to mitigate potential severe supply chain disruptions.

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