FBX Index December 2024: Potential strike and network changes

2025 is in full swing with two major impacts looming right at the outset of the year.

In the US, negotiations are to resume on January 7^th between the port workers’ union ILA and USMX representing the terminals. This puts them at a very tight time to reach an agreement as the deadline is January 15^th. Failure to reach this deadline will result in a strike in the ports on the US East and Gulf Coast ports from January 16^th.

In a pre-emptive move, many carriers have already announced strike-related surcharges to go into effect from, or around, January 16^th in case the strike should go ahead. Shippers have taken some degree of precaution and routed part of their cargo volumes via the US West Coast, which in turn has put added strain on the capacity for rail and road movements from the West to the East coasts of the US.

Should the strike go ahead, it appears unlikely that President Biden will intervene – he didn’t in October either – and as such the strike is likely to persist at least until January 20^th when Trump is inaugurated as president. This in itself would lead to a longer-term impact than the strike in October.

Irrespective of the strike and its possible duration, the next major event takes place from February 1^st. This is when the new alliances come into effect and the carriers begin shifting their vessels into their new service networks. The timing coincides with the seasonal demand slump after Chinese New Year, which falls on January 29^th this year.

The carriers usually blank a large amount of sailing immediately after Chinese New Year in order to match the drop in demand. Data from Sea-Intelligence shows that until now the announced amount of blank sailings is wholly insufficient to compensate for the seasonal slump in demand. Under normal market conditions, we would see a large amount of additional blank sailings being announced in the next week or two. However, the new alliance phase-in makes the situation more opaque this time.

From a carrier perspective, it is difficult to both phase vessels into the new networks and at the same time manage blank sailings effectively. Hence there is a risk that the carriers will prioritise getting their new alliance networks in place at the expense of managing the blank sailings as effectively as usual. This will cause some short-term overcapacity problems in early February which could lead to temporary rapid drops in spot rates.

If the US port strike goes ahead this will have a direct impact on the phase-in of these new networks. Vessels “trapped” off the US East Coast from mid-January will be unable to be back in Asia by end-February as planned, and hence impact the network integrity of the new alliances in March for Asian export cargo.

From a spot rate perspective, we saw an early strengthening of the Asia to Europe market in December which is consistent with the seasonality in this trade essentially happening a couple of weeks earlier than normal owing to the diversions around Africa. In the Pacific trade, the strengthening happened slightly later than for Asia-Europe but is also showing its usual seasonal uptick in preparation for Chinese New Year – combined with the front-loading of some cargo owing to the risk of the strike.

Going further into 2025, the next unknown is President Trump’s actions on tariffs. Plenty of threats have been issued, but at the end of the day it comes down to what, exactly, is being decided and implemented. When that is known, it also becomes more clear where, and how much, we will see front-loading of additional cargo as well as shifts in the supply chain.

About Lars Jensen, CEO, Vespucci Maritime

Lars is a leading expert and thought leader in analyzing global container shipping markets. Lars has 20 years’ experience hereof the last nine within multiple companies he has founded, with the main focus as CEO of Vespucci Maritime.
 

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