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ILWU ‘sending message’ to West Coast terminals

West Coast port officials, shippers, and truckers are growing more frustrated with recent actions by dockworkers that are disrupting the flow of cargo. However, longshoremen are limiting the level of disruption to avoid attention from the media and Biden administration. 

Those actions, such as allegedly fabricating safety issues involving cargo-handling machines, have been underway for weeks and are intended to add pressure to negotiation. No significant progress has been made since the summer. One port executive said, “They’re sending a message.”

These actions can be quite disruptive and costly for individual terminations and the shipping lines that call there. A terminal operator said claims of unsafe equipment at the ports of LA and LB will often shut down a terminal for half a shift to an entire shift.

Importers have experienced “minor disruptions” in LA and LB while taking delivery of containers. However, truckers are feeling the pain of delays in container availability and ad hoc terminal shutdowns more than most.

West Coast ports have been bleeding cargo since last September. The West Coast share of US imports from Asia at the end of 2022 was 58.8%, down from 61.5% in 2021. The East Coast’s share increased to 34.2% from 32.8% in 2021. The Gulf Coast’s share was 6.6%, up from 5.3%.

Retailers say they will continue to divert as much discretionary cargo as possible away from the West Coast until there is a new labor contract in place.

The loss of cargo caused man-hours paid to plummet last fall. However, negotiators are not feeling any pressure due to the Pay Guarantee Plan. This plan guarantees registered longshoremen 40 hours of pay each week.

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EC-WC spot rate spread returns to pre-pandemic levels

The spread between ocean spot rates to the East and West coasts in the eastbound trans-Pacific has narrowed to its pre-pandemic level of $1,200 per FEU. Industry sources expect the spread to remain tight during the post-Lunar New Year cargo lull that will last into March. 

According to Sea-Intelligence, the East Coast premium that importers paid to avoid West Coast port congestion and labor uncertainty has largely dissipated.

The Shanghai-New York spot rate was $3,241 per FEU as of January 26. The Shanghai-LA rate was $2,072 per FEU, a difference of $1,169. That is down from a spread of $3,995 in late September. In pre-pandemic January 2020, the spread was $1,188.

An NVO consultant said the current spread among NVO’s is about $1,250 per FEU. He expects little change for the coming months until factories in Asia fully reopen and freight rates begin to climb.

Trans-Pacific carriers plan to reduce capacity during the LNY by roughly 50% to prevent rates from going lower. The consultant said the blanked sailings could continue into the spring.

US import volumes are expected to increase in H2 2023. However, retailers say the strength of the recovery will depend on whether the economy experiences a soft or hard landing. The Global Port Tracker forecasts YoY monthly declines in US imports through at least May.

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About O’Neill Logistics

O’Neill Logistics is a leading third party logistics provider. We operate in California, Savannah, New Jersey. We service many verticals including Garments, Fashion Accessories, Footwear, Furniture, Home Goods, & Electronics. Additionally, we offer omni-channel distribution and all value-added services. Lastly, we focus on retail “drop shipment” fulfillment and item-level fulfillment services with same-day service offerings.

O’Neill Logistics has over 2 million square feet of state-of-the-art facilities. Additionally, we offer dray services to support the warehouses and provide distribution to retailers and wholesalers. Our reliable 3PL platform combines sophisticated technology with robust, flexible processing designs and speed-to-market gateway models.

Lastly, we aim to simplify your supply chain. We deliver exceptional service and can optimize your operational performance. Therefore, we aim to build, protect and foster strong business partnerships.

Please reach out to us if you have any questions or need assistance with your logistics solutions!