Ocean freight rates fall for third week – but USEC port strike a major threat

The downward trend of the Drewry World Container Index (WCI) continued this week, showing average rates have fallen another 2%, to $5,428 per 40ft, from the highs of mid-July.

This marks the third consecutive week of falling rates, but the consultant says there is still a long way to go, with the WCI sitting 282% higher than the 2019 pre-pandemic average.

And as last week, the most pronounced price decrease was seen on the Shanghai-LA route, which fell $198, to $6,303 per per 40ft, a drop of 3%.

Meanwhile, Xeneta yesterday warned that time was running out for shippers to make alternative arrangements should US east and Gulf coast port employers fail to strike agreement with the International Longshoremen’s Association (ILA) by 30 September. That’s when the current pay contract runs out and, without a new deal, another round of chaos and congestion could settle in along the eastern seaboard.

“Many shippers will be betting on a diplomatic solution to avoid strike action. However, this is a risky approach, given the current rhetoric,” said a Xeneta report yesterday. “Reports this week suggest negotiations between the ILA and the US Maritime Alliance have reached an impasse.”

US shippers have strategically built up inventories ahead of the usual peak season, says Xeneta, evidenced by the all-time high SE Asia-to-North America cargo volumes in June and a 23% year-on-year increase in that traffic for H1.

But for those shippers that haven’t ‘front-loaded’, “very few options are left on the table,” said the freight rate benchmarking and market analytics platform.

If Xeneta’s hypothesis is correct, and with the industry now having adapted to Red Sea disruption, union disputes on the US east coast might be the final hurdle before a well-deserved correction in freight rates.

Should it do so, while freight rates are likely to stay elevated over 2019 levels, growth in the container fleet of at least 8% since 2019 means freight rates are likely to drop well short of the historic highs seen recently – at least, until the next geopolitical upheaval comes along.