This week:
- Scheduling troubles hit the North-South trade lane after ILA strike
- Asia-North America ocean spot rates bottom out following pre-strike surge
- Supply chain analysts consider potential impact of Trump’s proposed tariff policy
- FMC announces waived or refunded per diem fees now total $3.2 million
- GAO report finds promising but narrow path for automation at US ports amid ILA-USMX talks
North-South Trade Lane Disrupted by Scheduling Woes, Effects of ILA Strike
Shippers on the North-South trade lane are grappling with significant congestion, thanks to scheduling woes and side effects of the recent International Longshoremen’s Association (ILA) strike at US East and Gulf Coast ports.
Vessels arriving from the US are experiencing bottlenecks at ports in Argentina, Brazil, and Uruguay. Industry stakeholders point to the three-day ILA strike earlier this month and ongoing labor disputes in Brazil as the primary reasons for the scheduling delays.
In an advisory posted to its website, Maersk warned of delays ranging from one to three days at terminals in Santos, Itapoá, and Rio Grande in Brazil, Bahia Blanca in Argentina, and Montevideo in Uruguay. In addition, the Brasil Terminal Portuário in Santos and terminals in Paranagua are experiencing delays of four to seven days.
A Brazilian freight forwarder speaking to the Journal of Commerce (JoC) reported severe congestion in the country’s southern region. “Some terminals are working over their capacity, which is causing extreme difficulty in terminal windows opening for delivery of containers,” the anonymous source said. “Santos was being used as an escape for this, but it’s also starting to get more difficult.”
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Following Pre-ILA Strike Surge, Asia-North America Spot Rates Decline
Spot rates for ocean shipments from Asia to North America are declining, according to a Freightos industry update issued last week. This follows an early peak season surge in July and August, as shippers created significant demand ahead of the ILA strike’s October 1 start date.
According to the Freightos bulletin, as of October 22, transpacific ocean rates per FEU to the US West Coast had fallen 35% since a July peak. The East Coast rate declined 38% in the same timeframe.
While the conclusion of pre-strike frontloading has contributed heavily to rate fluctuations, industry observers say it isn’t the only factor. In an email to Supply Chain Dive, Hind Chitty, a principal consultant for Drewry Supply Chain, pointed to carriers recalibrating for the slack season and recent diminished cargo demand.
Part of the decline in demand is due to some high-profile companies opting for air freight over ocean cargo. For example, Levi Strauss & Co. announced in a Q3 earnings call that it had switched specific high-priority purchase orders to air cargo to ensure timely deliveries for the holiday season.
Other big names, including Costco, locked in contracts for favorable ocean rates earlier this year. “Our team did a great job by insulating us with good solid contracts for this year,” Costco President and CEO Ron Vachris said in an earnings call last month.
Analysts: Proposed Trump Tariffs Could Disrupt US Importing Strategy
As the November 5th U.S. presidential election approaches, supply chain analysts are evaluating the potential effects of Donald Trump’s proposed tariff policy, should he secure a second term. Industry experts caution that Trump’s suggested 200% tariff could have significant implications for U.S. importing practices.
John McCauley, former vice president of transportation and logistics at Cargill and an independent consultant, noted that beneficial cargo owners (BCOs) may need to adapt their freight strategies. “The most likely outcome if a Trump administration implements this 200% tariff proposal would be an unplanned increase in landed costs due to higher tariffs from a single destination,” McCauley stated in an editorial for the JoC last week.
Judah Levine, head of research for Freightos, told CNBC that such tariffs could push ocean freight rates higher. Levine referenced Trump’s first term, when importers hurried to bring goods into the U.S. ahead of initial tariffs on Chinese imports. According to Freightos data, ocean container rates from Asia to the U.S. West Coast doubled between July and November 2018.
FMC Touts $3.2 Million Worth of Waived or Refunded Per Diem Charges
The Federal Maritime Commission (FMC) issued a press release last week touting the economic impact of its heightened regulatory monitoring since the start of the COVID-19 pandemic. According to the FMC, ocean carriers have waived or refunded $3.2 million in disputed per diem fees levied against shippers thanks to the agency streamlining its charge complaint process.
A statement released at this time last year placed the total at $1.7 million, meaning the FMC has overseen the recovery of an additional $1.5 million in the past 12 months. The agency notes these figures don’t include any amounts that shippers and carriers have settled privately.
The FMC also said it will initiate rule-making in 2025 for a new and permanent charge complaint procedure based on the steps it has taken since the pandemic.
Report Finds Narrow Path for Adopting Automation Tech at US Ports
Earlier this year, the US Government Accountability Office (GAO), a Congressional watchdog group, released a report about the feasibility of automation technology at American ports. According to the report released in March, the GAO found a possible but narrow path for adoption automation.
Given the ILA’s ongoing negotiations with the United States Maritime Alliance (USMX) for a new master contract — with automation a key sticking point — industry observers are looking to the GAO’s findings for guidance.
In an October 24 editorial, Mark Szakonyi, executive editor of the JoC, said the GAO report “details the possibilities of automation, but also the numerous hurdles.” This includes high implementation costs that reduce automation’s feasibility and labor opposition to the technology. In some cases, “automation can hurt productivity or fail to match that of human labor, the GAO’s survey of stakeholders at the top US ports revealed,” according to Szakonyi.
Still, automation holds potential, Szakonyi says. The GAO report noted how automated gate technologies at the Port of Virginia helped reduce truck dwells, leading to less harmful emissions. “Separately, the port has also credited its semi-automated stacking cranes at Norfolk International Terminals for helping it better handle import surges,” Szakonyi said.
