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North American Sea Freight Market Strained

Oct 30, 2024 | , , , , , , , , ,

The North American sea freight market faces ongoing challenges, with recent labour actions on the US East Coast fuelling local anxieties and adding congestion and capacity pressures on the West coast.

The three-day strike by the International Longshoremen’s Association (ILA) on the US East Coast in early October sent ripples across the industry, as importers scrambled to reroute shipments to West Coast ports. Record-breaking import volumes in Los Angeles and Long Beach in September have strained rail and terminal operations, pushing rail container dwell times over nine days, their highest in two years.

The impact of the ILA strike is compounded by recent actions in Canada, with Montreal dockworkers initiated a 24-hour strike last Sunday the 27th October, following earlier disruptions that have halted overtime work across the port. 

This seasonal surge in imports is expected to taper off in November, as most holiday merchandise arrives in the US by late October to be available for Black Friday and other peak shopping events. However, if contract negotiations between the ILA and East Coast employers, which are due to resume in November, remain unresolved into December, West Coast ports could capture a larger share of shipments, keeping demand elevated longer than usual on the Pacific Coast.

The main issue outstanding between the ILA and USMX is the use of terminal automation. The previous contract permitted semi-automation with union and terminal agreement on staffing but banned full automation. In this bargaining cycle, the ILA is pushing for a complete ban on all automation types.

Montreal’s container volumes have already dropped by nearly a quarter since 2022, with a growing shift of cargo to US East Coast ports—though the labour situation in the US may ultimately reverse this trend if Canadian ports gain relative stability.

Impact of the US presidential election on container shipping
Looking ahead, next week’s US presidential election introduces potential regulatory and economic uncertainties for the container shipping market. A second term for Donald Trump could bring a more protectionist stance, with proposed tariffs of up to 20% on all imports and as high as 60% on goods from China. Such policies would likely dampen US demand for imports, reshaping sourcing and supply chain strategies across Asia, where countries like Vietnam and India are already gaining market share as businesses diversify away from China.

By contrast, a potential administration under Kamala Harris is expected to support US industries through subsidies rather than aggressive tariffs, reducing the immediate risk of sharp import declines. However, increased government support for domestic production could still influence trade patterns, with downstream effects on global shipping demand. In either scenario, US trade policies will continue to play a significant role in shaping the container shipping market, particularly in trans-Pacific routes.

As North America’s sea freight market adapts to labour uncertainties and fluctuating trade policies, shippers face a complex landscape of demand pressures, capacity constraints, and fluctuating costs.

As always, we will guide you through the most import strategic adjustments, such as diversifying shipping routes and anticipating regulatory changes, to maintain supply chain stability and manage costs in the months ahead.

To discuss the current situation and how Metro can protect your North American supply chain, please EMAIL Andrew Smith, Chief Commercial Officer.

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Sea Freight Outlook for 2025

Oct 30, 2024 | , , , , , ,

The global sea freight market is set for another turbulent year in 2025, with rates likely to remain high despite anticipated softening in some lanes. Although new vessel deliveries are expected to bring additional capacity, a combination of geopolitical uncertainties and market reconfigurations is forecast to sustain above-average rates, continuing the challenges faced by shippers throughout 2024.

Several factors will influence rates in the coming year, including the ongoing conflict in the Red Sea and potential labour disruptions on the US East Coast. The three-day strike by the International Longshoremen’s Association (ILA) earlier in October has already raised concerns about future disruptions, with further strike action looming in January. Such incidents could trigger inflationary pressure on spot rates across various trade lanes, not just those directly affected. Shippers looking for stability in an uncertain market may find long-term rate agreements more favourable than navigating the spot market’s fluctuations.

Geopolitical tensions and trade disruptions
Drewry has flagged continuing geopolitical instability as a significant concern for 2025, warning that unresolved tensions in regions like the Red Sea and Persian Gulf could impact shipping operations well into the future. The Suez Canal, for example, is not expected to resume full-scale operations until at least 2026, keeping carriers reliant on alternate routes around the Cape of Good Hope. This prolonged disruption not only adds to transit times and costs but also restricts available shipping capacity, exerting further upward pressure on rates.

Compounding these risks are potential tariff changes, particularly from the US, where increased duties on Chinese goods may prompt shippers to expedite imports. This could spike rates temporarily, particularly for trans-Pacific routes, as companies seek to avoid potential costs associated with new tariffs. Additionally, ongoing demand for China-Mexico routes as an alternative entry point to the US may also lead to price increases, especially as the US presidential election may result in policy changes to trade and tariffs, adding to the overall uncertainty.

New alliances and Carrier Strategies
The reconfiguration of carrier alliances in early 2025 will further shape the sea freight landscape. As carriers adjust to new alliance structures, shippers are likely to see shifts in service reliability, transhipment frequency, and schedule integrity, especially on key routes from Asia. These adjustments are likely to create occasional disruptions in operations, as changes in routing, port calls, and service frequency impact transit times and predictability.

In anticipation of these market shifts, many shippers are already opting for stable, long-term pricing agreements over the volatility of the spot market. Fixing rates over a 12-month period is increasingly seen as a strategic move, as it provides greater budget predictability and insulation from potential rate spikes. While rates on certain lanes may soften as the new vessel capacity is deployed, Drewry expects them to stabilise well above pre-pandemic levels.

Metro’s Fixed-Rate options Can Provide Stability in Uncertain Times
As geopolitical risks and market disruptions continue to loom over the industry, maintaining resilient supply chains and budgeting effectively will be key priorities for shippers navigating the complexities of 2025’s sea freight landscape.

In a volatile sea freight market, securing fixed-rate agreements on popular shipping routes can help reduce risk and provide essential budgetary certainty. To explore how Metro’s fixed-rate options could support your business in 2025, please EMAIL chief commercial officer Andy Smith.

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Labour tensions rise on North America’s East coast

Oct 16, 2024 | , , , , , , , , , , , , ,

Ongoing labour disputes on the US East Coast and Canada’s Port of Montreal continue to threaten disruptions to North American supply chains.

The agreement between the ILA and the United States Maritime Alliance (USMX) on the US East coast (USEC) brings temporary relief, securing peace for the next three months. The wage increase of over 60% marks significant progress, but the contentious issue of automation remains unresolved and could lead to further disruptions when the current contract extension expires on 15 January 2025.

With over 60 ships backed-up during the strike, ports have been working hard to clear the backlog. They have been aided by spare capacity, which has been created by shippers front-loading and cargo diversions.

In many cases the ports extended operational hours to process delayed vessels, ensuring that the backlog will not stretch far into the busy holiday season.

Meanwhile, the Port of Montreal is bracing for an indefinite overtime strike that started on 10 October, following earlier strike actions that halted operations at two terminals. The port’s longshoremen are using the strike to pressure employers amid slow-moving negotiations, which have dragged on for over a year. This escalation threatens to further disrupt operations at Canada’s second-largest port, affecting supply chains and causing delays for transatlantic trade.

While some carriers have suspended their Emergency Operations Surcharges on the USEC, several have announced peak season surcharge (PSS) hikes. Maersk, CMA CGM, and MSC are introducing increased surcharges of up to 15% from Europe, the Mediterranean, and other regions to North America.

Some carriers have rerouted cargo to alternative ports to mitigate delays, and flexibility will be crucial as labour disputes continue. The ILA’s extension of negotiations to January, just before Chinese New Year shipping demand, suggests potential for further congestion and delays in the coming months.

The combination of vessel congestion, labour disputes, and surging rates highlights the importance of adaptable logistics strategies in today’s volatile shipping environment.

Metro works with shippers to overcome rising freight rates and operational uncertainty, with innovative solutions and proactive planning to keep supply chains flowing.

We have contingency plans in place to avoid the ports likely to be most affected by strikes, as well as alternative routes and entry points.

To discuss these issues and how Metro can protect your supply chain, please EMAIL Andrew Smith, Chief Commercial Officer.

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Sea freight market review

Oct 15, 2024 | , , , , , , , , , ,

The sea freight market in October 2024 is facing continued challenges from geopolitical tensions and industrial actions, with strikes on the US East and Gulf Coasts contributing to significant disruptions.

Although the three-day US East coast strike in early October has been resolved with a tentative agreement, the backlog of vessels could take weeks to clear. Montreal has also faced industrial action, adding to the strain on transatlantic trade.

Demand remains moderate, with global GDP growth projections modest due to ongoing geopolitical tensions and weak manufacturing performance. The ocean freight market has been challenging due to disruptions, including congestion caused by rerouting vessels around the Cape of Good Hope, following the Red Sea crisis.

Carrier alliances are reshaping trade routes. The 2M alliance between Maersk and MSC will dissolve in 2025, replaced by new alliances such as Gemini Cooperation and the Premier Alliance. The introduction of these new structures is expected to streamline services, particularly on Asia-Europe trades, but could cause shifts in port calls, with some major hubs benefitting and others losing direct connections.

Freight rates have fluctuated as a result of these disruptions. The muted Golden Week in Asia didn’t bring the anticipated rush, but rates on Asia-Europe routes saw some pressure, rising 1-2% in early October. Carriers have implemented cost-recovery surcharges in response to strikes and rerouting delays. The Shanghai Containerised Freight Index (SCFI) dropped from its July peak, but rates remain well above 2023 levels.

Capacity continues to tighten due to vessel bunching and delays, with 10% of the global fleet currently waiting at anchorages, the highest level recorded outside the pandemic period. Schedule reliability remains volatile – hovering just above 50% – especially on key routes from Asia to Europe and the Americas, with congestion at major Asian ports like Shanghai and Ningbo adding to delays.

In the near term, shippers should expect continued volatility, with upcoming industrial actions and new carrier alliances potentially altering trade patterns. While freight rates are stabilising in some regions, capacity remains limited, and schedule reliability a concern.

With ocean freight demand remaining high and capacity challenges on the horizon, the peak season could still be unpredictable. We encourage you to reach out now if you have urgent shipments and share your forecasts, so we can secure space on services that align with your deadlines and offer competitive rates.

To explore how we can strengthen and safeguard your ocean supply chain, please EMAIL our Chief Commercial Officer, Andy Smith.

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