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US businesses prepare for ILA strike threat and Trump’s China tariffs

Dec 11, 2024 | , , , , ,

Retailers and shippers are bracing for operational disruptions and cost increases as the January 2025 deadline for the International Longshoremen’s Association (ILA) negotiations looms, alongside the threat of new tariffs on Chinese imports from President-elect Donald Trump.

This combination of challenges has led to an extended peak shipping season, as businesses rush to front-load cargo and mitigate potential impacts.

Surge in imports
US ports have seen a significant increase in inbound cargo volumes, reflecting retailers’ efforts to stock up ahead of potential disruptions. October imports jumped by over 9% year on year, exceeding projections, and further increases of nearly 15% are forecast for both November and December. The January 2025 forecast has also been revised sharply upward, with inbound cargo now expected to grow by over 12% compared to the same period last year, up from an earlier forecast of just 2.6%.

This surge is driven by retailers’ attempts to avoid disruptions caused by either an ILA strike or increased tariffs on goods from China. The race to bring goods into the US before the 15th January contract negotiation deadline and the expected implementation of tariffs has led to heightened activity at ports, with shippers working to ensure goods arrive before potential delays or cost increases take effect.

Rising inventories
The rush to import goods has resulted in a notable increase in retail inventory levels. The US retail inventory-to-sales ratio rose to 1.42 in September, up from 1.27 in August. This level, last seen in early 2023 and 2021, is among the highest recorded since the pandemic began. Retailers are stockpiling goods not only to prepare for potential supply chain disruptions but also to shield themselves from the anticipated cost impact of higher tariffs on Chinese products.

Labour negotiations
ILA negotiations with the US Maritime Alliance (USMX) have stalled, with automation emerging as the primary sticking point. The ILA strongly opposes the introduction of semi-automated equipment, such as rail-mounted gantry cranes, at marine terminals. With no agreement in sight, the likelihood of a strike after the January 15 deadline has increased, adding uncertainty for retailers and logistics providers.

While the October three-day strike was resolved with a temporary pact, the breakdown of talks in November has heightened concerns. Retailers are closely monitoring developments, knowing that a prolonged strike could severely disrupt supply chains and lead to higher costs for both businesses and consumers.

Tariff uncertainty
President-elect Trump’s promise to impose tariffs exceeding 60% on Chinese goods is also driving the import surge. Although it remains unclear whether the tariffs will be implemented immediately or phased in, retailers are taking no chances. Many have accelerated their efforts to source goods from alternative suppliers, building on years of diversification away from reliance on China.

Retailers have used recent earnings calls to emphasise the progress made in reducing exposure to Chinese imports, but for some, the impending tariffs will still have a significant impact. The race to import goods before January reflects both the uncertainty surrounding the tariff timeline and the anticipated financial strain they will impose.

Preparing for 2025
As the new year approaches, businesses are facing a perfect storm of challenges in the supply chain. The combined threats of port labour disruptions and tariff hikes are driving unprecedented levels of front-loading, resulting in increased strain on logistics networks and rising inventory levels.

Retailers and shippers are implementing strategies to manage these uncertainties, from diversifying supply chains to stockpiling inventory. However, the potential for delays, higher costs, and operational disruptions will require ongoing agility and preparation to navigate the year ahead. The outcome of the ILA negotiations and the implementation timeline for tariffs will be key factors shaping the supply chain landscape in early 2025.

With disruption and tariff uncertainties redefining the market, Metro’s proactive solutions are essential to keeping your supply chain strong and adaptable.

Our expert team continuously monitors the shifting landscape, offering strategic guidance to help you navigate regulatory changes, optimise shipping routes to avoid disruption, and control costs effectively.

EMAIL Andrew Smith, Chief Commercial Officer, today to discover how Metro can protect and future-proof your North American supply chain.

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The potential impact of the new US administration on global trade

Nov 27, 2024 | , , , , , , , , , , , , ,

As the United States, and the world, braces for potential shifts in trade policy, new tariff proposals and ongoing supply chain challenges are reshaping the global logistics landscape.

President-Elect Trump’s threatened trade tariffs, along with geopolitical and operational pressures, are driving significant changes in import patterns, freight rates, and supply chain strategies.

Protectionist policies
President Trump’s first administration was marked by aggressive trade policies, and his second term is marked by a resurgence of tariff-based strategies targeting China and other major trading partners. Proposed tariffs include a universal rate of 10-20% on all imports to the US, with an additional 60-100% on imports from China, together with another 10% above any additional tariffs, on all products, until the supply of the illegal drug fentanyl ceases. 

These measures could significantly raise consumer costs for goods such as apparel, toys, furniture, and household appliances. In 2023, tariffs on Chinese apparel cost U.S. companies and consumers $1.3 billion, with forecasts estimating that consumers would pay between $13.9 billion and $24 billion more annually due to the proposed tariffs.

Additional tariffs could reduce trans-Pacific shipping volumes, while supply chains may diversify further to Southeast Asia, India, and Latin America. These shifts would alter global shipping patterns and potentially lower container shipping demand from Asia.

Surge in imports ahead of tariffs
The prospect of new tariffs is expected to accelerate import activity, as businesses aim to pre-empt the potential cost increases by expediting shipments, placing substantial demand on vessel space. This surge, if realised, would exacerbate pressures on an already strained logistics infrastructure, particularly during peak seasons.

Volatility in sea freight rates
Tariff-driven demand spikes are poised to push freight rates higher, especially on trans-Pacific routes. Companies, wary of increasing costs, are likely to explore alternative sourcing locations outside China, though this has been complicated further as the US president-elect said he would sign an executive order imposing a 25% tariff on all goods coming from Mexico and Canada, after being inaugurated on 20 January 2025. The impending early Chinese lunar new year in late January 2025 further compounds the uncertainty, as shippers rush to secure capacity.

Heightened supply chain challenges
Labour disputes continue to threaten North American supply chains, with the potential for an International Longshoremen’s Association (ILA) strike if negotiations do not conclude positively by January 2025. Concurrently, recent lockouts at Montreal and Vancouver ports have disrupted trade flows, with ripple effects expected at other ports, including Halifax.

A second Trump administration may prioritise renegotiating or withdrawing from international trade agreements to favour US interests, including potential revisions to WTO agreements. Such moves could disrupt North American trade flows and create further uncertainty for global shipping stakeholders. Additionally, heightened geopolitical tensions could impact critical maritime routes and alliances, particularly in the South China Sea.

The combination of tariff uncertainties, labour disputes, and shifting sourcing strategies signals a challenging period for global trade. Rising costs and operational complexities could challenge shipping in the long term, with broader implications for economic stability.

As the situation in the United States develops we will continue to provide regular updates, but if you have any concerns or questions about how these events might impact your shipments, please reach out to us.

EMAIL Chief Commercial Officer, Andy Smith today to learn how we can safeguard your supply chain during challenging periods.

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FTSE 100 firms identify supply chain threats as a principal risk

Nov 22, 2024 | , , , ,

A recent study by the Boston Consulting Group, reveals that 72% of FTSE 100 companies now identify supply chain threats as a principal risk to their operations.

This heightened concern follows significant disruptions such as the Suez Canal blockage, the COVID-19 pandemic, and the Red Sea shipping crisis, which have exposed vulnerabilities in global supply chains.

Despite widespread acknowledgment of these risks, only 54 of the FTSE 100 companies have provided shareholders with detailed information on their mitigation strategies. This lack of transparency underscores the need for more robust communication regarding risk management practices.

To address these challenges, companies are implementing various strategies:

  • Supplier engagement: Regular meetings with suppliers to monitor and share potential risks.
  • Risk documentation: Compiling and updating ‘risk registers’ to document supplier-specific risks.
  • Inventory management: Maintaining higher levels of ‘buffer’ stock to mitigate short-term crises.
  • Diversification: Expanding supply chain streams to prevent business interruptions.

Technological solutions are also being leveraged to enhance resilience. Companies are implementing robust cybersecurity measures, utilising artificial intelligence for supply chain design and monitoring, deploying algorithms to identify high-risk raw materials, and conducting comprehensive assessments of suppliers’ financial resilience and infrastructure.

Supply chain risks have now reached the boardroom, with discussions taking place within executive and audit committees. This elevation in priority reflects the critical importance of supply chain stability to overall business operations.

The findings emphasise the necessity for businesses to prioritise transparency, technological innovation, and strategic planning in their supply chain management. As risks continue to evolve, proactive risk management has become a vital component of corporate governance.

Metro’s advanced supply chain technology

Metro’s proprietary cutting-edge supply chain technology has been conceived and designed to enhance visibility, control, and efficiency. The AI-driven solutions provide real-time insights into supply chain operations, enabling companies to anticipate disruptions and respond swiftly. Features include comprehensive purchase order management, multi-modal track and trace capabilities, and consignment management tools. Additionally, the MVT ECO platform allows shippers to forecast, measure, and offset global supply chain emissions, supporting sustainability goals. By integrating these technologies, businesses can strengthen their supply chain resilience and maintain operational continuity in an increasingly complex global environment.

Metro is leading the industry in developing the technologies and platforms that simplify and support the development of resilient, agile and adaptable supply chains.

Visibility, control, environmental, and customs modules, blend together with integrations of critical digital trade documents, to provide an unparalleled supply chain platform.

EMAIL Ian Powell for further Information on our digital capabilities and how we can protect and enhance your global trade and business growth ambitions.

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November: North American market update

Nov 13, 2024 | , , , , , , ,

The North American freight market faces a complex set of challenges as ongoing labour disputes, potential trade policy shifts, and evolving service offerings reshape the landscape.

Canadian port strikes strain supply chain
Labour disputes have disrupted operations at Canada’s east and west coast ports, with significant impacts on supply chains. At the Port of Montreal, the Maritime Employers Association (MEA) imposed a lockout after the Longshoremen’s Union CUPE Local 375 rejected their offer, halting operations since 31st October. On the west coast, stalled negotiations between the International Longshore and Warehouse Union (ILWU) and port authorities in Vancouver and Prince Rupert effectively paralysed these critical gateways for Canadian imports and exports.

The closures forced Canadian freight to be diverted to US west coast ports, including Seattle, Oakland, Los Angeles, and Long Beach, adding to congestion and creating backlogs that could take months to resolve.

Government intervenes to resume operations
In a decisive move on the 12th November, the Canadian government directed the Canada Industrial Relations Board (CIRB) to end the strikes at Vancouver and Montreal and impose binding arbitration. While business groups welcomed the intervention, union representatives criticised the move, arguing it undermines workers’ rights.

As operations begin to resume, the Montreal Port Authority announced plans to gradually clear terminal backlogs and restore fluidity, although it could take weeks to return to normal. Meanwhile, Vancouver’s container terminals remain delayed, with limited anchorage availability adding further challenges.

US east and gulf coast strike uncertainties persist
Following a brief three-day strike in October on the US east and Gulf coasts, concerns remain about potential further disruptions. The strike’s conclusion hinged on a provisional wage agreement between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX), with more complex issues such as automation still unresolved.

Negotiations resumed with a new contract deadline of 15th January 2025, but ended early on the 12th November, when the ILA broke off talks with the USMX. According to ILA, the decision was made after USMX continued “pushing automation and semi-automation language in its Master Contract proposals that will eliminate ILA jobs.” The ILA added it “remains hopeful that USMX will alter its un-winnable strategy, and resume negotiations as soon as possible.”

The uncertainty surrounding contract outcomes is likely to push shippers to expedite shipments before January, amplifying capacity constraints across North American ports. The October strike impacted trans-Atlantic and Asia-US trade lanes, with trans-Atlantic westbound volumes falling by 15% and Asia-US east coast capacity expected to drop 17% in mid-November.

Potential tariff escalation under new US administration
The US presidential inauguration in January may bring significant trade policy changes, with proposed tariffs that could reach 60% on China and 20% on other countries.

While the EU, which has a $130bn trade surplus with the US, is preparing counter-tariffs, the UK, which enjoys a relatively modest surplus, appears unlikely to retaliate, favouring open trade instead.

This potential tariff escalation could lead to intense front-loading of shipments before January, creating a pre-inauguration shipping peak, which might align with the pre-Lunar New Year demand surge.

Metro’s expanding US focus
The United States is Metro’s 2nd largest origin/destination and client location, with a large number of customers also having their head office located in North America.

To better support this large and growing client base, Metro will open its first office in the US next year. The non-operational office will focus on local American customers, to enhance the level of service and support provided to them, including the oversight of 3rd country movements through the Americas.

In-house shipping line offers Express US service
Wholly-owned group subsidiary, Ellerman City Liners, has launched the weekly sailing United States Express Service (USX), delivering some of the fastest containerised transit times available. Direct to Philadelphia from just 13 days, USX utilises non-congested ports and terminals, to streamline port clearance and inland movements.

USX is the only direct service operating to and from Jacksonville, serving the Baltic, Scandinavia, Europe and the United States, with four calls on the East Coast, including Philadelphia.

Ellerman’s USX service offers fast and reliable transit times, with lots of flexibility and operates in cooperation with MSC. It is gratifying to see our group working closely with the world’s largest carrier, which underlines our continued commitment to supporting our partner carriers. Many of whom we have worked with for decades.

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.

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

Category: International Trade

China | International Trade | News | Retail | Sea | Supply Chain | United States

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