FBX Index October 2024: On track for a new early peak

The US East Coast port strike only lasted for three days, yet the ripple effects from the strike will be felt until mid-November. The resultant pile-up of vessels with cargo to be handled was mainly taken care of within the first three weeks of the strike. However, the ripples related to the vessels themselves spread more slowly.

The three-day strike meant that with a two-week time delay these vessels were all delayed into Europe, causing a temporary drop in export capacity. This is likely the key reason for the increase in Atlantic headhaul spot rates seen towards the second half of October. The same effect then spread to South America and finally to Asia where a slight dip in capacity will happen around mid-November.

However, a more important consequence of the strike and re-opening is that there is still no agreement about the full new labour contract. Currently, there is only a tentative agreement related to salaries, but there is no agreement related to the union’s strong demand not to allow any automation to take place in the ports.

However, a more important consequence of the strike and re-opening is that there is still no agreement about the full new labour contract. Currently, there is only a tentative agreement related to salaries, but there is no agreement related to the union’s strong demand not to allow any automation to take place in the ports. There is a new deadline of 15 January 2025 for a full resolution. Should there not be a new agreement, there will be a new strike from 15 January. The only thing known presently is that the parties have agreed to resume negotiations in November.

Looking at the developments leading up to the October strike and the stance of the union, there is clearly a realistic likelihood that we will see another strike.

Conversations with a range of US importers have shown that they share this concern and, as a consequence, are planning to ship cargo earlier than usual where feasible.

Chinese New Year 2025 is on 29 January. This would imply that normal seasonality would have demand for bookings peak around mid-January with a ramp-up towards peak in essence beginning in the second half of December.

However, the concern over another US East Coast strike would lead to US importers partially booking cargo from mid-November to be able to get their cargo delivered prior to a potential strike. As such, this will place spot rates under pressure to US East Coast from mid-November.

However, the concern over another US East Coast strike would lead to US importers partially booking cargo from mid-November to be able to get their cargo delivered prior to a potential strike. As such, this will place spot rates under pressure to US East Coast from mid-November. At the same time, they might redirect some of their cargo booked from mid-December onwards to go via the US West Coast instead to avoid a potential strike, which will place US West Coast spot rates under pressure.

On top of this, the continuing deviation around Africa due to the Red Sea crisis will mean the usual peak from Asia to both Europe and to US East Coast (for services going round Africa) will begin two weeks earlier than normal at least, meaning already as we enter December.

Yet another element will happen if Donald Trump wins the US presidential election on 5 November. In that case, many US importers will be concerned about the introduction of new large trade tariffs. This will add yet another boost to an already early peak season starting from mid-November.

Yet another element will happen if Donald Trump wins the US presidential election on 5 November. In that case, many US importers will be concerned about the introduction of new large trade tariffs. This will add yet another boost to an already early peak season starting from mid-November.

On the backside of all of this, it is likely we could see a steep, albeit temporary, drop in spot rates after Chinese New Year in 2025. This is partly because of the early shipment of volumes due to the fear of a strike and partly because this is when the new Alliances are phasing in their new networks. This will make the networks unstable for a couple of months and make it difficult for carriers to properly manage blank sailings, creating a high likelihood of overcapacity during this period.
Source: Vespucci Maritime