Strikes in Canada continue, alongside some peak season optimism: Freightos analysis

After four days without meetings, ILWU Canada talks with the BCMEA resumed Saturday (8 July) as the port worker strike entered its second week, while federal mediators are now also involved in negotiations.

Container ship backlogs have now developed, with more than 10 vessels anchored near Vancouver and several off Prince Rupert port. And though ILWU and ILA members in the US have pledged not to handle diverted containers to the West or East Coast, respectively, there are already reports of diversions and rotation changes – some already handled – to US West Coast ports.

This volume shift might have contributed to last week's 11% rise in transpacific ocean rates (US$1,319/FEU) to the West Coast and an 8% increase to the East Coast.

According to Freightos, these rate increases might also reflect a rise in demand and the anticipated start of peak season.

The latest National Retail Federation report on US ocean import volumes estimates June volumes declined from May but were roughly on par with 2019 levels, and projects a 4% monthly rise in July, a 5% spike in August, and still-elevated volumes through October - with monthly throughput up to 5% higher than in 2019.

"Though not everyone is convinced, these projections predict a return to pretty typical seasonality and growth relative to pre-pandemic. Combined with still-elevated inventories for many retailers, these estimates also imply expectations for resilient consumer spending through the holiday season,” explained a Freightos official.

With volumes bigger than in 2018 and 2019 in May and June, ocean rates that have mostly been at or below 2019 levels may be due to extra capacity rather than subdued demand.

Freightos mentioned that, even if volumes continue to rise, carriers may struggle to raise freight rates when new vessels reach the transpacific in August and September, providing 20-25% more capacity than last year. Carriers are already attempting to mitigate the supply-side rise by increasing blanked sailings, slowing sailing speeds, and making more port calls.

Meanwhile, more carriers in the Asia-North Europe trade have planned large rate increases for the end of the month. However, with current rates of US$1,300/FEU barely below 2019 levels, only mild signs of demand growth, and additional new capacity entering this market, many are not convinced that this GRI attempt can be successful.

The Ocean rates will be effective as follows:

Asia-US West Coast prices (FBX01 Weekly) increased 11% to US$1,319/FEU. This rate is 82% lower than the same time last year.

Asia-US East Coast prices (FBX03 Weekly) climbed 8% to US$2,376/FEU, and are 76% lower than rates for this week last year.

Asia-N. Europe prices (FBX11 Weekly) were unchanged at US$1,300/FEU, and are 88% lower than rates for this week last year.

Asia-Mediterranean prices (FBX13 Weekly) fell 2% to US$2,149/FEU, and are 83% lower than rates for this week last year.

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