International Maritime

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Restocking begins on trans-Atlantic ahead of potential labor disruptions

By Greg Knowler

US importers of Europe-sourced goods are facing an autumn of disruption with a rail shutdown potentially snarling Canada ’ s gateway ports and a dockworker strike at marine terminals along the US East and Gulf coasts looking ever more likely at the end of September .

The growing threat of delays at ports from Canada to Texas is prompting US importers to restock inventories and frontload orders , with volume rising on the westbound trans-Atlantic trade lane .

“ A lot of people are taking some measures to ensure they are not too vulnerable ,” Hapag-Lloyd CEO Rolf Habben Jansen told reporters during a media briefing Aug . 19 . But he added that what happens after the International Longshoremen ’ s Association ’ s ( ILA ) existing contract expires on Sept . 30 “ is anyone ’ s guess .”

The ILA is locked in increasingly fractious negotiations over a new multi-year contract with US East and Gulf coast port employers represented by the United States Maritime Alliance ( USMX ).

“ If you see the rhetoric that has been out there in the last couple of months , [ the threat of a longshore labor strike closing ports ] has certainly not declined ,” Habben Jansen said , reiterating a view he expressed during the carrier ’ s second-quarter earnings call .

It is too early for any significant increase in demand to be reflected yet in US import data . The latest data from PIERS , a sister product of the Journal of Commerce within S & P Global , show westbound trans-Atlantic volumes grew 3 % year over year to 321,040 TEUs in July .

US retail sales also remain resilient , while the ratio of US retail inventories to sales , a barometer of inventory balance , edged up in June to 1.21 from 1.20 in May , according to US Census Bureau data .

US importers are frontloading shipments from Europe amid contentious labor talks on both coasts . Shutterstock . com

Potentially ‘ devastating ’ impact

Alison Leavitt , managing director of the Wine and Spirits Shippers Association ( WSSA ), said there was growing concern among WSSA members that an ILA strike would follow disruption caused by a shutdown of the Canadian rail network that began Aug . 22 .

Little progress has been made in negotiations between the Teamsters Canada Rail Conference ( TCRC ) and Canada ’ s two freight railroads , Canadian National Railway ( CN ) and Canadian Pacific Kansas City ( CPKC ), which began shutting down operations ahead of the work stoppage .

“ Many US importers use Canada ports ,” Leavitt told the Journal of Commerce . “ For example , a lot of auto parts move via Montreal to the Midwest and this cargo would be immediately rerouted via US ports .

“ If both Canada rail and ILA strike , it will be truly devastating for importers on the East Coast ,” she added .

Leavitt said there has been limited frontloading among WSSA members to get high-volume products into the US before Sept . 30 as “ wine and spirits are agricultural products and cannot easily be pushed forward in terms of production and bottling .”

Stephanie Loomis , head of ocean freight Americas at Rhenus Logistics , said the Germany-based forwarder ’ s main customers in the US have not advanced shipments “ as of yet ,” but there were signs of unease beginning to emerge as the ILA contract talks stalled .

“ If both Canada rail and ILA strike , it will be truly devastating for importers on the East Coast .”

“ Rhenus sales teams here in the US are starting to hear some concerns coming from importers ... some of these accounts are discussing internally and looking to possibly fast track orders ,” Loomis told the Journal of Commerce .

In another sign that carriers are expecting port disruption and a rise in volume through September , several lines have announced peak season surcharges for Sept . 1 and Sept . 15 , a move Leavitt said was “ highly unusual ” for this time of year .

But Loomis was skeptical that carriers would get those surcharges to stick . “ The amounts are all over the place , with [ Mediterranean Shipping Co .] coming out with a laughable $ 1,000 per FEU while others are being more realistic with $ 300 to $ 600 ,” she said .

Average spot rates on the westbound trans-Atlantic have started to edge up after barely changing for the past three months . As of Aug . 16 , North Europe – US East Coast rates of $ 1,465 per FEU were up 4.6 % from the previous week and 10 % from the same week last year , according to Platts , also part of S & P Global .

email : greg . knowler @ spglobal . com

16 Journal of Commerce | September 9 , 2024 www . joc . com