Ocean freight rates could skyrocket towards the end of the year depending on two important fourth-quarter developments – an impending port worker strike in the United States and the presidential election pitting Vice President Kamala Harris against Donald Trump on November 5.
Alarmingly, one of the possibilities is around the corner, involving some 85 000 dockworkers downing tools after wage negotiations between the International Longshoremen's Association (ILA) and United States Maritime Alliance (USMX), representing employers, broke down.
Unless mediation unlocks the current stalemate, dock workers in the US could embark on strike action from October 1.
CNBS and CBS News have reported that a strike could disrupt operations at five of the ten busiest ports in North America, affecting nearly half of all US imports and potentially leading to billions in trade losses.
The ILA is demanding a 77% wage increase, which has been a significant sticking point in negotiations with USMX, leading to deadlocked negotiations and the latter indicating that it won’t budge.
USMX has even turned to the Biden Administration, unsuccessfully appealing to the US government to prevent a strike through the Taft-Hartley Act, legislation that regulates labour at the country’s port.
In addition, should Trump defeat Harris at the polls, a world of price pain lies in store for shippers and agents, Lars Jensen of maritime intelligence consultancy Vespucci Maritime has warned.
In a recent discussion with Patrick Berglund of market analytics platform Xeneta – “Beyond the Buzz: A Deep Dive into Shipping Market Movements” – Jensen said “strike action is going to have a major impact if it goes ahead”.
Potentially making matters worse, is the prospect of a Trump presidency.
“It is exceedingly likely that it is going to lead to a massive ramp-up in tariffs, especially against China, but potentially against other countries as well.”
Jensen said there was a strong possibility that importers were readying themselves for freight fluctuations under a Trump administration.
“It will lead to a massive spike in import demand into the US, moving product in before tariffs.”
Coinciding as it does with the run-up to the Chinese New Year, the situation would be exacerbated, Jensen said.
“If you really want to magnify that, put a strike on top of a Trump presidency and you’re going to see skyrocketing freight rates towards the end of the year.”
