The ongoing strike on the US East Coast (USEC) is having a significant impact on global shipping. For each week of the strike, over 60 vessels are accumulating outside USEC ports, with a third of them forming a queue outside New York. This disruption is resulting in a capacity loss of more than 400,000 TEU per week, representing over 1.4% of the global fleet. Consequently, freight rates are expected to rise not only on US trades but also on major deep-sea trades worldwide, according to Sea Intelligence.
Impact On Trade and Service
The number of scheduled deep-sea port calls per day, across all NAEC ports, varies from 23 calls scheduled for October 7th, to 45 calls currently scheduled for October 16th. 17.5% of the NAEC port calls are scheduled for New York, with a 172 total calls in October, and a daily average of 5.7 calls. 16.0% are scheduled for Norfolk (Total: 157, Avg: 5.2), 15.3% for Savannah (Total: 150, Avg: 5.0), and 10.3% for Charleston (Total: 101, Avg: 3.4). These four ports account for 59.1% of all NAEC deep-sea port calls in October 2024.
About Canada
Astute readers will have noticed that so far, when discussing geographical aspects in this analysis, we have very consistently referred to the destination region as North America East Coast (NAEC), which includes both US and Canada. It is a long-established convention in this and other of our publications and data, that we always stringently adhere to actual trade definitions, and with approximately 7% of US-bound cargo coming in through Canadian ports, separating out Canada from the NAEC region is not straightforward. Referring to figure A2, 81 (8.3%) of the 981 NAEC port calls in October 2024 are scheduled for the four Canadian ports of Montreal, Halifax, St Johns, and Argentia, of which 31 are made aboard Canada-exclusive services.
But as the Canadian ports are not subject to the Master Contract for the US East Coast ports, the US strike does not formally extend to the Canadian ports, and in theory, it is “business as usual” in the Canada ports, although noting that the Canadian wing of the ILA initiated a 3-day strike in two terminals at the Port of Montreal on September 30th, which account for 40% of the port’s handling volumes, but at least officially, this is unrelated to the US East Coast strike.
In theory, the five Canada-exclusive services should not be directly impacted by the US strike, but the US/CA-mixed services will certainly be impacted, as obviously will the US-exclusive services.
Leading up to the strike, there has been plenty of speculation, as to whether the US-bound cargo could (to some degree) be off-loaded in Canadian ports. Firstly, it should be noted that from a simple infra-structure-perspective, there is simply no way that the four Canadian ports on the East Coast could make any serious dent in the totality of US-bound volumes, even if all of the vessels could be re-routed to Canadian ports. By our best estimates, Canada handles about 8.1% of all NAEC-inbound laden cargo, and again by our best estimates, the Canadian ports have excess handling capacity of about 10-15% over their “normal” handling volumes for October.
About West Coast
Over the past several weeks, various market commentators have suggested that shipping lines could simply re-route vessels bound for the US East Coast to the US West Coast, while the strike is ongoing in the East Coast. Alas, the metaphorical vessel has sailed on that option. While we have certainly seen significant volume shifts from East to West in the weeks and months leading up to today, as well as a clear trend of some importers front-loading traditional 3rd quarter peak season volumes into May, June and July, once the containers are loaded onto a vessel bound for the US East Coast, then that is where it’s going to, for several reasons
Firstly, the only trades where this would even be feasible, would be USEC services heading towards the Panama Canal, and then re-route them towards the West Coast instead. Vessels already past the Panama Canal laden with cargo, cannot be sent back out through the canal, as doing so would add at least 2-3 weeks to the transit time, and there is currently no strong indication that the strike will take this long to resolve, so sending the vessels to the West Coast, could end up delaying the cargo for far longer than the length of the strike.
Secondly, even for the vessels that could conceivably be routed to the West Coast, that still crates an even bigger problem, as the customers’ containers are now on the wrong side of the continent, and for a clear majority of the customers on the USEC-bound vessels, having their boxes stuck on the West Coast, would be infinitely worse than being stuck outside of a USEC port.
Thirdly, while the US West Coast ports have considerably more port capacity than the Canadian ports, we still quickly run into serious capacity restrictions. With the US East Coast ports now handling more than half of the US laden cargo, it is clear that only a part of the USEC volumes could theoretically be handled in West Coast ports. How much additional cargo can the West Coast ports handle? We cannot say for certain, but the pandemic period may provide some guidance.
Vessel Queues and Fleet Loss
It will be both physically impossible, as well as operationally opposed by the Canadian wing of the ILA, for the Canadian ports to absorb any significant share of the US-bound cargo. Moreover, we have assumed that the same will apply to any intermediate calls in Panama, across any Caribbean hub ports, as well as for the few services that call Mexico en route to USEC. For all of these, we assume that these en-route port calls will be made as planned, before the vessels ends up anchored outside the first USEC port call.
We cannot say for certain, that this is what will happen, but there does not seem to be any real alternatives. Surely, some shipping lines will dump as much cargo as they can in these ports, and a few sailings have actually been scheduled to completely omit any USEC ports, and these have already been accounted for in our calculations, but the options to do so are very limited, and these alternative ports will quickly clog up if used too much, which will merely serve to exacerbate the growing congestion challenges.
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Source: Sea Intelligence
