North American Container Rate Increases Falter on Mixed Demand

North American shipping carriers are wrestling to implement rate increases amid an opaque market driven by fear an International Longshoremen’s Association strike could disrupt supply chains, market sources said, reports SP Global.

North American container rate

The refusal to accept higher rate levels highlights a market where nimble participants are seizing opportunities to offer competitive rates, creating a wide range of rates for available forty-foot equivalent unit containers.

In addition, demand has been mixed throughout the North American markets as some peak season orders have already been fulfilled.

In July of this year, there was a spike in volume as shippers looked to beat the peak-season rush, and since then, rates have been slowly declining from their recent highs. As of Aug. 22, Platts assessed imports from North Asia to the US East Coast at $8,500/FEU — down from a peak of $9,950/FEU on July 17, according to S&P Global Commodity Insights. Meanwhile, imports from North Asia to the US West Coast are priced at $6,800/FEU — down $800 from a peak of $7,600/FEU on July 22. Platts is a part of S&P Global Commodity Insights.

However, with the looming threat of an International Longshoremen’s Association strike on the East and Gulf Coasts of the US at the end of the month, market participants are weary of potential rate increases due to congestion on the East Coast and increased volume on the West Coast.

Although the overall market sentiment is skeptical that a strike would go on for very long during an election year, many are concerned about the impact that a short lockout would have on the containers market.

But even a one-day disruption can require up to six days of recovery time, according to Alan Murphy, CEO of Sea-Intelligence.

Despite the potential impact of a short disruption, market participants say there has been little planning to deal with a longer strike.