Impending ILA Strike Threatens U.S. Supply Chains Amid Rising Shipping Uncertainty

21 Aug Impending ILA Strike Threatens U.S. Supply Chains Amid Rising Shipping Uncertainty

The International Longshoremen’s Association (ILA) has issued a strike warning for its 85,000 members, set to begin on October 1 if a new contract isn’t reached by then.

Xeneta, a freight rate benchmarking platform, cautions shippers to act swiftly, particularly those using transatlantic routes. With a typical sailing time of 24 days from Genoa to Savannah, plus around 10 days for land operations, delays are imminent. For transpacific routes, the situation is even more critical. Shipping times between Shanghai and New York stretch to 50 days, meaning some containers are already en route and will arrive after September 30, regardless of any deal.

Expectations for rate reductions due to an influx of new vessels were upended by geopolitical tensions in the Middle East. The redirection of ships from Asia to Europe, bypassing the Suez Canal and instead taking the longer route around the Cape of Good Hope, has also contributed to the disruption. Although additional tonnage has alleviated some supply chain challenges, shippers have moved up their holiday season imports to avoid potential delays later in the year.

The Shanghai Containerized Freight Index (SCFI) saw a slight increase last week, rising to 3,281.36 points.

A potential strike on the U.S. East Coast could further strain supply chains. With contract negotiations set to conclude by September 30, the possibility of industrial action looms large. U.S. market consultant Jon Monroe notes that the negotiations have yet to produce a resolution.

Sea-Intelligence analysts estimate that a strike could affect 2.3 million TEUs at U.S. East Coast ports in October, equating to an impact of 74,000 TEUs per day. Simon Heaney, an industry analyst, suggests that such a disruption would likely divert cargo to West Coast ports, increasing pressure there.

If the strike proceeds, it could significantly impact transpacific cargo flows. However, in the absence of further disruptions, Heaney expects spot rates for Asia-Europe and Asia-U.S. routes to decline as more capacity becomes available throughout the year.

“While spot rates are gradually declining, they remain elevated compared to the start of the year,” Heaney noted, emphasizing the need to monitor demand as the market adjusts to the new capacity.